Annual Report 2005

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Annual
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An interview with
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Financial summary
Description of business
Corporate governance
Remuneration report
Operating and financial review
and prospects
Financial statements
Notes to the financial
statements
Investor information
An interview with
Focus on the patient
The year of the vaccine
Growing brands
Powering performance
Performance highlights
Business operating review
Summary remuneration report
Summary financial statements
Shareholder information
Chairman and CEOs
closing letter
GlaxoSmithKline Annual Report 2005
Corporate
responsibility
report
Access to medicines
Research and innovation
Ethical conduct
Employees
Human rights
Environment
Community investment
Annual Report 2005
Corporate
brochure
human being
Do more, feel better, live longer

Head Office and Registered Office
GlaxoSmithKline plc
980 Great West Road
Brentford, Middlesex TW8 9GS
United Kingdom
Tel: +44 (0)20 8047 5000
www.gsk.com
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Printed by The Midas Press in the UK. The paper used in the
production of this document is made from pulps harvested
from sustainable forests, also using sawmill residues and
forest thinnings. It is elemental chlorine-free.
Discovering important medicines
eradicating diseases, improving

the quality of peoples lives
and making medicines available
to a greater number of people
This is what we do and what we do matters to people.
JP Garnier (left) and Sir Christopher Gent (right)
Thanks to the efforts of our employees around the world,

2005 was a very successful year for GSK. Not only
was it our best year ever from a financial standpoint,
we also made substantial progress with our pipeline
of innovative medicines and vaccines.
JP Garnier, Chief Executive Officer
An interview with Sir Christopher Gent, Chairman and JP Garnier, Chief Executive Officer
2005: a year of success and progress

Year of the vaccine
GSK delivered an excellent financial performance in 2005.

Turnover of 21.7 billion grew by 7% at constant exchange
rates (CER). Earnings per share (EPS) were 82.6p, with growth
of 18% at CER, putting GSK in the top tier of global
pharmaceutical companies in terms of performance.
2005 was a landmark year for GSKs vaccines business. Sales

increased by 15% and the company made a number of
significant strategic acquisitions. The acquisition of ID Biomedical
was an important move for GSK, says JP, which strengthened
our position in the global flu vaccine market, and increased our
ability to prepare for and respond to a potential flu pandemic.
These figures confirm the excellent growth of our key products

and the efficiency of our global operations, says JP.
GSKs performance was driven by sales of key pharmaceutical
products. Sales of Seretide/Advair, Avandia, Coreg, Lamictal
and Valtrex all continued their impressive growth, says JP.
We also saw good performance from a number of newer
products, including Avodart for enlarging prostate, Boniva/
Bonviva for osteoporosis and Requip for Restless Legs
Syndrome, which all show great promise for the future, both
for patients and GSK.
Looking into 2006, the strong growth seen from key products
and from our vaccines business is expected to continue and we
anticipate an EPS growth of around 10% at CER.
Pipeline progress
The pharmaceutical industry is making a

positive improvement to peoples lives. It
has a noble purpose. It develops medicines
and vaccines that save lives and make
people feel better.
Sir Christopher Gent, Chairman
We also acquired a plant in Marietta, Pennsylvania which will

give us access to tissue culture technology in our vaccine
manufacturing. The acquisition of Corixa gives us valuable
adjuvant technology, enabling us to boost human immune
response to our vaccines.
GSK continues to meet the challenge of increasing Research &

Development (R&D) productivity to discover new medicines
faster and more economically. The companys pipeline is one of
the largest and most promising in the industry, with 149 projects
in clinical development (as at the end of February 2006),
including 95 new chemical entities (NCEs), 29 product line
extensions (PLEs) and 25 vaccines.
GSK also made good progress on its pipeline of new vaccines.

We expect five major vaccine launches in the next five years,
says JP. Perhaps most exciting is Cervarix for cervical cancer,
which we expect to file for approval in Europe in March 2006
and in the USA by the end of the year.
Improving access to medicines

GSK continues to seek new ways of improving access to its
medicines for people who need them, but are least able to
obtain them. This challenge is particularly acute in the developing
world, where GSK has been offering many of its medicines and
vaccines at not-for-profit prices for some years.
In 2006, we anticipate further good news on GSKs late-stage

pipeline, which is developing at a fast pace. Eight major new
assets are scheduled to enter phase III in 2006, doubling our
late-stage pipeline, says JP.
GSK Annual Report 2005
01
However, addressing this challenge is something GSK cannot

do alone. The work of GSK with organisations such as the Bill
& Melinda Gates Foundation highlights the benefits of publicprivate partnerships. They provide a way for companies such
as GSK and the private sector to work together. Typically, GSK
provides the R&D, technology, manufacturing and distribution
expertise, while other partners and governments help fund
the development and delivery costs.
The tragedies during the year brought home to me the extent

to which the pharmaceutical industry is making a positive
improvement to peoples lives, says Sir Christopher. It has a
noble purpose. It develops medicines and vaccines that save
lives and make people feel better.
Being human
We continue to meet the challenges of improving productivity
in R&D and ensuring patients have access to medicines, even in
the poorest parts of the world. This Report highlights some of
the work we have done to implement our strategies to meet
these challenges. Behind each one is a human story.
In 2005, GSK entered three groundbreaking public-private

partnerships to develop vaccines against the biggest causes of
death in the developing world today AIDS, malaria and
tuberculosis.
We thank all our employees for their efforts in 2005. Their

commitment and passion, both individually and through their
teamwork, have helped us make GSK the success it is today. We
also appreciate the great support our employees receive from
their families for the work they are doing at GSK.
Public-private partnerships use the

respective strengths of the partners
and bring out the best of each. Most
importantly, it is a model that works.
We are grateful for the significant contribution of Tachi Yamada,

Chairman of R&D and Executive Director, who is to retire in June
2006, and we welcome Moncef Slaoui, who will succeed Tachi
with effect from 1st June 2006. We would also like to thank Jack
Ziegler, President of GSK Consumer Healthcare, who retired from
the company in January 2006, and welcome his successor, John
Clarke. We also thank Dr Lucy Shapiro, who is to retire as a NonExecutive Director at the companys Annual General Meeting in
May 2006, and we welcome Tom de Swaan, who joined the
Board in January 2006 as a new Non-Executive Director.
Reaching out to patients

In 2005, GSK introduced and strengthened a number of
initiatives aimed at improving patients understanding of GSKs
medicines, and programmes to help gain access to them. These
initiatives include GSKs pioneering Clinical Trial Register, which
was expanded to contain 2,125 summaries of clinical trials by
the end of 2005.
In the USA, GSK is placing more emphasis on education and
the patient in direct-to-consumer advertising, and providing
people with advice on GSKs programmes and the industrys
Partnerships for Prescriptions Assistance which help people gain
access to the medicines they need.
Through these and other initiatives, we are seeking to
differentiate GSK as a company finding solutions to the
healthcare challenges that society faces. I believe we are well on
the way to achieving that, says Sir Christopher.
A broader contribution
Sir Christopher Gent

Chairman
GSK's global community investment activities in 2005 were

valued at 380 million, equivalent to 5.6% of Group profit
before tax.
The year saw a number of natural disasters, including the Asian
tsunami, the Guatemalan hurricane, the New Orleans floods
and the earthquake that struck parts of India and Pakistan. GSK
was quick to respond to help victims of these tragedies. My
thanks go to our employees for their response to these crises. It
makes me proud to lead an organisation with such committed
and compassionate people, who can respond so effectively to
help people in real need, says JP.
For these disasters alone, GSK contributed more than 3 million
in cash and donated medicines and vaccines valued at over 14
million towards the relief efforts.
02
JP Garnier
Chief Executive Officer
Contents
Report of the Directors
Financial summary
Remuneration Report
Operating and financial review and prospects
04
05
27
37
55
Directors statements of responsibility
Independent Auditors report
Consolidated income statement
Consolidated balance sheet
Consolidated cash flow statement
Consolidated statement of recognised income and expense
Notes to the financial statements
Financial statements of GlaxoSmithKline plc
82
83
84
85
86
88
89
165
Financial record
Taxation information for shareholders
172
182
186
Glossary of terms
187
Index
188
The Annual Report was approved by the Board of Directors on 1st

March 2006 and published on 3rd March 2006.
Website
GlaxoSmithKlines website, www.gsk.com gives additional information
on the Group. Information made available on the website does not
constitute part of this Annual Report.
03
Financial summary
Turnover
Operating profit
Profit before taxation
Profit after taxation for the year
REPORT OF THE DIRECTORS
Profit attributable to minority interests

Profit attributable to shareholders
2004
m
CER%
21,660
6,874
6,732
4,816
19,986
5,756
5,779
4,022
7
16
13
17
8
19
16
20
127
114
4,689
3,908
18
21
Earnings per share
82.6p
68.1p
Diluted earnings per share
82.0p
68.0p
44p
42p
Dividends per share
Growth
2005
m
Net cash inflow from operating activities
5,958
4,944
Net assets
7,570
5,937
History and development of the company

GlaxoSmithKline plc is a public limited company incorporated on 6th December 1999 under English law. Its shares are listed on the London
Stock Exchange and the New York Stock Exchange. On 27th December 2000 the company acquired Glaxo Wellcome plc and SmithKline
Beecham plc, both English public limited companies, by way of a scheme of arrangement for the merger of the two companies. Both Glaxo
Wellcome and SmithKline Beecham were major global healthcare businesses.
GSK plc and its subsidiary and associated undertakings constitute a major global healthcare group engaged in the creation, discovery,
development, manufacture and marketing of pharmaceutical and consumer health-related products.
GSK has its corporate head office in London. It also has operational headquarters in Philadelphia and Research Triangle Park, USA, and
operations in some 119 countries, with products sold in over 130 countries. The principal research and development (R&D) facilities are in the
UK, the USA, Japan, Italy, Spain and Belgium. Products are currently manufactured in some 37 countries.
The major markets for the Groups products are the USA, France, Japan, the UK, Italy, Germany and Spain.
Business segments
GSK operates principally in two industry segments:
Pharmaceuticals (prescription pharmaceuticals and vaccines)
Consumer Healthcare (over-the-counter medicines, oral care and nutritional healthcare).
The Group, as a multinational business, operates in many countries and earns revenues and incurs costs in many currencies. The results of the
Group, as reported in sterling, are therefore affected by movements in exchange rates between sterling and overseas currencies. Average
exchange rates prevailing during the period are used to translate the results and cash flows of overseas subsidiary and associated undertakings
and joint ventures into sterling. Period end rates are used to translate the net assets of those undertakings. The currencies which most influence
these translations are the US dollar, the Euro and the Japanese Yen.
In order to illustrate underlying performance, it is the Groups practice to discuss its results in terms of constant exchange rate (CER) growth. This
represents growth calculated as if the exchange rates used to determine the results of overseas companies in sterling had remained unchanged
from those used in the previous year. CER% represents growth at constant exchange rates. % represents growth at actual exchange rates.
Cautionary statement regarding forward-looking statements

The Group's reports filed with or furnished to the US Securities and Exchange Commission (SEC), including this document and written information released, or oral
statements made, to the public in the future by or on behalf of the Group, may contain forward-looking statements. Forward-looking statements give the Group's
current expectations or forecasts of future events. An investor can identify these statements by the fact that they do not relate strictly to historical or current facts.
They use words such as anticipate, estimate, expect, intend, will, project, plan, believe and other words and terms of similar meaning in connection with
any discussion of future operating or financial performance. In particular, these include statements relating to future actions, prospective products or product approvals,
future performance or results of current and anticipated products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, and financial results.
The Group undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.
Forward-looking statements involve inherent risks and uncertainties. The Group cautions investors that a number of important factors, including those in this document,
could cause actual results to differ materially from those contained in any forward-looking statement. Such factors include, but are not limited to, those discussed
under Risk factors on pages 71 to 74 of this Annual Report.
04
The Description of business discusses the strategy, activities,
resources and operating environment of the business and identifies
developments and achievements in 2005, under the following
headings:
Our global quest is to improve the quality of human life by

enabling people to do more, feel better and live longer.
Strategy
Strategy and business drivers
Business drivers
Build the best product pipeline in the industry
Achieve commercial and operational excellence
Improve access to medicines
Be the best place for the best people to do their best work
Global manufacturing and supply
Corporate responsibility and community investment
Our Spirit
We undertake our quest with the enthusiasm of entrepreneurs,
excited by the constant search for innovation. We value
performance achieved with integrity. We will attain success as
a world class global leader with each and every one of our
people contributing with passion and an unmatched sense of
urgency.
Annual Report and Review

This report is the Annual Report of GlaxoSmithKline plc for the year
ended 31st December 2005, prepared in accordance with United
Kingdom requirements.
A summary report on the year, the Annual Review 2005, intended for
the investor not needing the full detail of the Annual Report, is
produced as a separate document.
The Annual Review includes the joint statement by the Chairman and
the Chief Executive Officer, a summary review of operations, summary
financial statements and a summary remuneration report.
06
07
14
15
16
17
18
Products and competition

Pharmaceutical
Consumer Healthcare
20
23
Regulatory environment
Regulation
Intellectual property
Responsibility for environment, health and safety
24
25
26
Discussion of the Groups management structures and corporate

governance procedures is set out in Corporate governance (pages 27
to 36).
The Annual Review is issued to all shareholders. The Annual Report is

issued to shareholders who have elected to receive it. Both documents
are available on GlaxoSmithKlines corporate website at www.gsk.com.
The Remuneration Report gives details of the Groups policies on

Directors remuneration and the amounts earned by Directors and
senior management in 2005 (pages 37 to 54).
Discussion of the Groups operating and financial performance and
financial resources is given in the Operating and financial review and
prospects (pages 55 to 80).
In this Report:
GlaxoSmithKline, the Group or GSK means GlaxoSmithKline plc and its
subsidiary undertakings.
The company means GlaxoSmithKline plc.
GlaxoSmithKline share means an Ordinary Share of GlaxoSmithKline plc of 25p.
American Depositary Share (ADS) represents two GlaxoSmithKline shares.
Throughout this report, figures quoted for market size, market share and market
growth rates relate to the 12 months ended 30th September 2005 (or later where
available). These are GSKs estimates based on the most recent data from
independent external sources, valued in sterling at relevant exchange rates. Figures
quoted for product market share reflect sales by GSK and licensees.
Brand names appearing in italics throughout this report are trademarks either
owned by and/or licensed to GlaxoSmithKline or associated companies, with the
exception of Baycol and Levitra, trademarks of Bayer, Boniva/Bonviva, a trademark
of Roche, Entereg, a trademark of Adolor Corporation in the USA, Hepsera, a
trademark of Gilead Sciences in some countries including the USA, Integrilin, a
trademark of Millennium Pharmaceuticals, Micropump, a trademark of Flamel
Technologies, Natrecor, a trademark of Scios and Janssen, Navelbine, a trademark
of Pierre Fabre Mdicament, Nicoderm, a trademark of Sanofi-Aventis, Elan,
Novartis or GlaxoSmithKline in certain countries, Pritor, a trademark of Boehringer
Ingelheim and Vesicare, a trademark of Yamanouchi Pharmaceuticals, and in
Japan and South Korea a trademark of Astellas Pharmaceuticals, all of which are
used in certain countries under license by the Group.
05
Mission
Strategy and business drivers

Corporate Responsibility
In working to meet these challenges and implement these business
drivers, GSK recognises that it has a responsibility to support the
delivery of better healthcare and education in under-served
communities and to connect business decisions to ethical, social and
environmental concerns. GSKs commitment to these is outlined on
pages 18 to 19, with more information available in the Corporate
Responsibility Report, which is available on the website at
www.gsk.com
GlaxoSmithKline is addressing the key challenges that face both the

pharmaceutical industry and society as a whole:
improving productivity in research and development
ensuring patients have access to new medicines
The strategies to meet these challenges focus on several business

drivers:

The Group is aiming to create the best product pipeline in the industry
for the benefit of patients, consumers and society. This includes
developing a focused portfolio strategy to support the pipeline and
manage the full life cycle of compounds from their launch as
prescription medicines through to becoming over-the-counter
products where appropriate. This strategy includes selective inlicensing and efficient execution of development, commercialisation
and the supply chain processes.
GSKs R&D organisation measures productivity by the number and
innovation of the products it creates, and also by the commercial
value of these products and their ability to address the unmet needs
of all consumers. This includes patients, healthcare professionals,
budget holders and regulators, each with their own perspective on
what constitutes a valuable new product.
Further details are given on pages 7 to 13.

GSK links research and commercial operations closely in order to
maximise the value of the portfolio. As compounds are developed
and tested, marketing campaigns and sales efforts are planned.
Where appropriate within markets, the Group aims to build strong
relationships with patients and consumers as the ultimate users of
its medicines.
Common approaches to management processes and business
functions are used by an internationally diverse and talented
management team in order to create and sustain competitive
advantage in all markets. Further details are given on page 14.

GSK has created extensive programmes designed to improve the
healthcare of people who have limited access to medicines both in the
developed and developing world. These are set out in the Improve
access to medicines section of this report (page 15).
The single greatest source of competitive advantage of any
organisation is its people. The Groups ambition is to be the place
where great people apply their energy and passion to make a
difference in the world. Their skills and intellect are key components
in the successful implementation of the Groups strategy. The work
environment supports an informed, empowered and resilient
workforce, in which the Group values and draws on the diverse
knowledge, perspectives, experience, and styles of the global
community. Further details are given on page 16.
06

Research and Development Pharmaceuticals
GSKs strategic intent is to become the indisputable leader in the
industry. This success depends on the bedrock of the Groups
business a vibrant and productive Research and Development
(R&D) function that develops new ways to help patients while
supporting existing products.
A decision is then made on whether the information available justifies

the compounds progression into late-stage drug development, where
large-scale clinical trials are conducted to register and commercialise
the product.
Focus on the Patient

R&Ds focus on the patient involves seeking the views of patients and
their families for an understanding of the most important aspects of
their disease and the impact it has on their lives. This information, in
conjunction with discussions with key opinion leaders, is then used
to shape drug development programmes so that new medicines are
likely to benefit patients.
During 2005 18 compounds entered clinical trials for the first time.
A GSK research facility focusing on new therapies in the treatment of
neurodegenerative illnesses, such as Alzheimers disease, was opened
in Singapore in 2005.
Finding candidate compounds

Two components are needed in the early stages of finding new
medicines targets that can be shown to affect mechanisms of
important pathological processes in human disease and compounds
able to modulate the behaviour of specific targets.
The application of experimental medicine is a major opportunity for

the industry. An important tool in this field is clinical imaging, which
enables visualisation of changes in the body made in response to the
administration of a new medicine. In 2005 world-class imaging
experts were recruited from both the USA and UK, as GSK prepared
to open the Clinical Imaging Centre at the Hammersmith Hospital
in London in 2006. In addition, R&D has established global
collaborations with academic imaging centres that make it a leader
in application of imaging for drug discovery and development.
Many diseases arise through complex interactions between gene

variants and environmental factors. Within GSK, Genetics Research
aims to take advantage of this by identifying genes which influence
common diseases with large unmet medical needs and major patient
burdens. These insights help in the search for targets with known
relevance to the disease, and hence a greater chance of delivering
benefit to the patients.
Converting candidates to medicines

Preclinical Development (PCD) includes a wide range of activities
throughout the entire drug development process. It is also involves the
enhancement of existing products by devising more convenient
formulations. Early in the development process, the metabolism and
safety of compounds are evaluated in laboratory animals before
testing in humans. The testing required in animals is highly regulated
(see Animals and research, page 10).
Discovery Research (DR) produces the lead compounds that may

influence targets which form the basis of drug discovery efforts in
GSKs Centres of Excellence for Drug Discovery (CEDDs). In 2005,
DR performed over 90 million assays and provided the CEDDs with
50 high-quality new lead compounds. Investment in DR has been
focused on increasing the quality and quantity of the lead
compounds available.
PCD researchers investigate appropriate dosage forms (for example,

tablets or inhalers) and develop formulations to enhance a drugs
effectiveness and ease of use by the patient. Processes and
supporting analytical methods for drug synthesis and product
formulation and delivery are scaled up to meet increasing supply
requirements. This leads to the technical transfer of the processes and
methods to manufacturing. The New Product Supply process, a
partnership between R&D and Global Manufacturing and Supply,
ensures that a robust product is developed for large-scale commercial
manufacturing and launch.
Selecting the best candidate molecules

The fundamental steps in turning a lead compound into a drug
candidate are optimising it for potency, efficacy and safety and then
demonstrating the validity of the therapeutic hypothesis through early
clinical trials of the resulting candidate.
These steps are helped by rapid, informed decision making and creative
solutions to the issues that inevitably arise in this phase of development.
GSK has designed the CEDDs, which are focused on specific disease
areas, to be nimble and entrepreneurial. There are seven CEDDs, based
in Europe and the USA:
To provide focus for the development process, all the major functional
components of clinical, medical, biomedical data, regulatory and
safety are integrated into a single management organisation,
Worldwide Development (WWD).
Biopharmaceuticals Stevenage, UK
Cardiovascular & Urogenital Diseases Upper Merion, USA
Metabolic & Viral Diseases Research Triangle Park, USA
Microbial, Musculoskeletal & Proliferative Diseases, including cancer
Upper Providence, USA
Neurology & Gastrointestinal Diseases Harlow, UK
Psychiatry Verona, Italy
Respiratory and Inflammation Stevenage, UK.
GSKs Medicine Development Centres (MDCs), which provide a focus

for late-stage development, are responsible for creating value through
the delivery of full product development plans, managing the day-today operational activities for the late-stage development portfolio and
ensuring strong partnerships with the CEDDs and Global Commercial
Strategy (GCS).
07
Each CEDD is responsible for assessing the safety and other

development characteristics of lead compounds in preclinical screens,
some of which may involve using animals. This allows the selection of
the best candidate for a new medicine. Once this is achieved, the
CEDDs are responsible for demonstrating that the compound has
satisfied a proof of therapeutic concept during mid-stage clinical trials.

continued
Extending the use of existing products

Once a product is launched, it is important to establish additional
ways in which patients can be helped. This can be through
investigating whether any other illnesses may be treated with the
product or by the development of additional, more convenient dosage
forms. Some developments reflect feedback from patients and the
medical professions, while others are the result of continuing research
into disease and its causes.
The MDCs are based at the major USA and UK sites and are aligned
with the following therapeutic areas:
Cardiovascular/Metabolic
Infectious Diseases including Diseases of the Developing World
(DDW)
Musculoskeletal/Inflammation/Gastrointestinal/Urology
Neuroscience (Psychiatry/Neurology)
Oncology
Respiratory.
Examples of the importance of lifecycle management to GSK include

the new indication of restless leg syndrome for Requip and monthly
dosing of Boniva to simplify its administration for prevention of
osteoporosis. Line extensions add significant value to the product
portfolio. Recent examples, such as Augmentin ES/XR, Seroxat/Paxil
CR and Wellbutrin XL, achieved sales of 888 million in 2005.
These teams are responsible for maximising the worldwide

development opportunities for each product within their remit so that
all the information needed to support the registration, safety
programmes, pricing and formulary negotiations is available when
needed. Commercial input from Global Commercial Strategy ensures
that regional marketing needs are integrated into any development
plans at an early stage.
Productivity
The challenge of increasing R&D productivity continued in 2005.
Programmes to identify associations between diseases and genes have
helped point to areas of research more likely to produce new ways of
helping patients. Increased automation in screening has provided
higher quality lead compounds more quickly.
In addition, R&D is investigating new ways of operating to enable it

to respond to the variety of external pressures on the industry, such
as increasing regulatory stringency, so that it is positioned to ensure
that effective new medicines reach patients as soon as possible.
Progress of the portfolio is communicated to investors and the media

at regular intervals during the year. A major presentation on the
vaccine portfolio was held in June and on the oncology and supportive
care portfolio in November 2005. Details of GSKs product
development pipeline are given on pages 11 to 13.
GSK believes that pharmacogenetic research, which correlates

genetic data with response to medicine, will help to reduce pipeline
attrition and improve productivity. R&D is collecting DNA samples in
clinical studies to identify pharmacogenetic information that can help
predict a patients response. This information is intended to define
patient groups likely to gain benefit from treatment, or to suffer a
side effect, as the compound progresses through development in
the clinic. Ultimately, pharmacogenetics promises to provide
physicians with information to help them select the medicine and
dose most likely to benefit their patient.
Managing the portfolio

With improved productivity, more compounds are progressed into
later phases of development. This progress, however, puts demands
on our R&D resources and it is important to look objectively at the
portfolio. Key projects reaching significant milestones are reviewed
each month by the Product Management Board (PMB), which is
responsible for determining if an asset has met criteria for passing
into the next phase of development.
During 2005, R&D has taken several approaches to improving

productivity in clinical trials, including an increasing use of countries
outside Western Europe and the USA and the introduction of direct
electronic data capture in most new clinical trials. These
improvements in productivity will continue going forward.
GSK continues to identify compounds from other companies that

would enhance the portfolio and to create innovative collaborations
to ensure that the Group is regarded as the partner of choice for large
and small companies.
All clinical trials sponsored by GSK, irrespective of where they take

place, are conducted according to international standards of good
clinical practice and applicable laws and regulations. The protocols
are reviewed by the external regulatory agencies in the relevant
countries where required and all protocols are considered by an Ethics
Review Committee, whose remit covers the site where the study will
take place. Safety data is routinely collected throughout development
programmes and is reported to national and regional regulatory
agencies in line with applicable regulations.
In 2005 a specific Centre of Excellence for External Drug Discovery was

created. This small internal management team is responsible for
delivering compounds with clinical proof of concept by establishing
and managing long-term strategic collaborations with biotechnology
companies, small- and mid-sized pharmaceutical companies, and
academic institutions. The Group has committed funding for two
years to these collaborations, with an option to renew for an
additional three years.
The GSK Global Safety Board is responsible internally for approving

pivotal studies and investigating any issues related to patient safety
arising during the development programme. During 2005, GSK took
a further step in making information from its clinical trials widely and
easily available by extending its Clinical Trial Register, a public website
on which clinical trials data are published. Regulatory authorities will
continue to be informed of the data generated so they may be
reassured of the safety and efficacy of GSKs products. The Clinical Trial
Register will enhance the ability of clinicians to make informed clinical
judgements to benefit their patients.
In-licensing
In-licensing or co-marketing/co-promotion agreements concluded in
2005 were:
The development and commercialisation of Vertex Pharmaceuticals
Inc.s VX-409, Nav1.8 Na-channel blocker plus back-up molecules
for pain (preclinical)
The development and promotion of Allergan Inc.s Botox in Japan
and China
The development and commercialisation of a renin inhibitor
program (preclinical) with Vitae Pharmaceuticals Inc.
08

continued
a significant increase in flu vaccine manufacturing and development

capacity by:
acquiring ID Biomedical, a North American developer of vaccines
for infectious diseases and producer of influenza vaccines with
sites in Canada and the USA, for 874 million
investing over 64 million in extending its German vaccine facility
purchasing a vaccine R&D and manufacturing site in the USA
acquiring US based Corixa Corporation, a developer of innovative
vaccine adjuvants, for approximately 150 million
entering into three groundbreaking public-private partnerships to
develop vaccines against the three biggest killers in the developing
world, AIDS, malaria and tuberculosis.
Discontinuations
All R&D carries a risk of failure. Lead compounds showing positive
activity against a validated target may prove insufficiently safe to
introduce to humans or impossible to manufacture on a commercial
scale. Also, compounds may not show the expected benefits in
patients in large scale clinical testing. These discontinuations occur
despite extensive predictive testing.
Late-stage projects terminated during 2005 in Phase III included
aplaviroc (873140) and 695634, both for HIV, Avandia for psoriasis
and Lamictal XR for schizophrenia.
GSK expects to launch five major new vaccines within the next five years:
a human papilloma virus vaccine preventing cervical cancer
the USA and EU launch of a vaccine against rotavirus induced
gastroenteritis and the strengthening of its presence in international
markets
a vaccine against pneumococcal disease
an improved vaccine for influenza
vaccine combinations against meningitis.
Research and development vaccines

The majority of GSKs vaccine R&D activities are conducted at its
biologicals headquarters in Rixensart, Belgium. These include clinical
development, regulatory strategy, commercial strategy, scaling up,
vaccine production, packaging and all other support functions. Over
1,500 scientists are devoted to developing new vaccines and more
cost-effective and convenient combination vaccines to prevent
infections that cause serious medical problems worldwide. GSK is
also targeting therapeutic vaccines that may prevent relapse in
cancer patients.
The strength of GSKs vaccine pipeline is expected to provide

opportunities for GSK to deliver new vaccines for many years to come.
Diseases of the developing world

Continued investment in research into diseases that disproportionately
affect the developing world is essential if there is to be a long-term
improvement in the health of people who live in these regions. As part
of GSKs response to this challenge, it operates a drug discovery unit,
dedicated to finding new medicines for these diseases, based at Tres
Cantos, Spain. The work undertaken in Tres Cantos focuses on malaria
and tuberculosis which, together with work elsewhere in the Group
on HIV/AIDS and vaccines, means GSK is addressing the prevention
and treatment of all three of the World Health Organizations (WHO)
top priority diseases.
Vaccine discovery involves many collaborations with academia and

the biotech industry worldwide and allows identification of new
vaccine antigens which are then expressed in yeast, bacteria or
mammalian cells and purified to a very high level.
This is followed by formulation of the clinical lots of the vaccine. This
may involve mixing antigens with selected novel proprietary adjuvants,
which are designed to stimulate a good immune response. The first
step is to evaluate the safety and efficacy of the candidate vaccine in
a preclinical setting, usually involving an animal model. The candidate
vaccine is then tested in clinical trials in healthy individuals to evaluate
safety and effectiveness in inducing an immune response to protect
the body from infection encountered later in a natural setting (Phase
I/II). Large-scale field trials in healthy individuals follow to establish
safety and efficacy in a cross section of the population (Phase III).
GSK currently has 14 clinical programmes of relevance to the developing

world, eight of which are aimed at producing vaccines and medicines
for diseases that disproportionately affect developing countries.
Public/private partnerships (PPP) remain essential to fund research
where there is no commercially viable market for a potential product.
GSK is a leader in working with PPP and continues to collaborate closely
with many governments, academic centres, United Nations agencies
and other global funding bodies in this area, to maximise expertise
and knowledge. This has the dual benefit of encouraging research and
development and accelerating access to the medicines in the
developing world. For example, in 2005, GSK announced partnerships
with the Global Alliance for TB Drug Development, the Aeras Global
TB Vaccine Foundation and the International AIDS Vaccine Initiative.
GSKs malaria falcipain inhibitors project was chosen for the Medicines
for Malaria Venture project of the year award.
The results obtained during clinical trials and data regarding the
development of a quality and large-scale production process and
facilities are then combined into a regulatory file which is submitted
to the authorities in the various countries where the vaccine is to be
made available.
After launch, post marketing studies of considerable size are set up
to assess vaccination programmes impact and to monitor vaccine
safety (Phase IV).
Vaccine manufacturing is particularly complex as it requires the use
of living micro-organisms. Sophisticated quality assurance and quality
control procedures are in place to ensure both quality and safety of
the vaccines and this commonly includes animal use. Due to their
biological nature, health authorities may subject vaccines to a second
control to guarantee the highest quality standards.
09
In 2005, GSK made a number of investments that strengthen its

vaccine capabilities:
The exercise of an option for Theravance Inc.s inhaled muscarinic

antagonist / beta 2 agonist programme (preclinical)
The exercise of options for Human Genome Science Inc.s
LymphoStat B (completed Phase IIa) for rheumatoid arthritis and
systematic lupus erythematosus and mapatumumab TRAIL R1
monoclonal antibody for various cancer indications (Phase II).

continued
Animals and research

For ethical, regulatory and scientific reasons, research using animals
remains a small but vital part of research and development of new
medicines and vaccines. GSK only uses animals where there is no
alternative and only in the numbers required for each test. The Group
strives to exceed regulatory standards in the care and use of the
animals it uses and undergoes internal and external review to assure
these standards.
GSKs submissions to the regulatory authorities in the USA and EU for

the first time and approvals during 2005 were:
USA
Europe
5
6
7
6
11
13
Submission
Approval
In 2006, the late-stage pipeline is expected to expand further with

eight major assets anticipated to enter phase III development. Also,
in 2006, GSK anticipates seven products will be approved and/or
launched and seven product filings are planned. For further details
of these developments expected in 2006 see the GSK outlook on
page 71.
The vast majority of the experimental methods do not use animals.

GSK is actively engaged in research to develop and validate more tests
that either avoid the use of animals in research or reduce the numbers
needed. When animals are used in research unnecessary pain or
suffering is scrupulously avoided.
GSKs policy is to obtain patent protection on all significant products

discovered or developed through its R&D activities. Patent protection
for new active ingredients is available in all significant markets.
Protection can also be obtained for new pharmaceutical formulations
and manufacturing processes, and for new medical uses and special
devices for administering products.
GSK understands that use of animals for research purposes

commands a high level of public interest. The GlaxoSmithKline Public
Policy Position The care and ethical use of animals in research, and
further information and reports, are available on the website,
www.gsk.com, or from Secretariat.
Research and development Consumer Healthcare

Key
R&D has aligned itself closely with the new Consumer Healthcare
operating model and structure. For the Global brands, it now mirrors
the commercial structure with R&D teams paired with commercial
teams and located in the principal centres for Consumer Healthcare
R&D at Weybridge in the UK and in Parsippany in the USA; with this
co-location, these sites are now termed Innovation Centres. The focus
of R&D is on the identification and rapid development of novel
products that bring benefits to consumers in the over-the-counter
(OTC), oral care and nutritional healthcare markets.
(v)
(p)
*
S
A
AL
MAA
NDA
Phase I
Phase II
GSKs pipeline
The chart on the right shows new chemical entities (NCE) and product
line extensions (PLE) for projects in the clinic in 2001 and 2005. At the
end of February 2006, GSK had nearly 200 pharmaceutical and vaccine
projects in development. Of these, 149 are in the clinic comprising 95
NCEs, 29 PLEs and 25 vaccines, compared with 118 in 2001. Since
2001 the number of projects in the late stages of development has
increased from 31 to 57.
Phase III
Vaccine
Pharmaccine
Compounds in Shionogi-GlaxoSmithKline Pharmaceuticals LLC joint
venture
In-license or other alliance relationship with third party
Date of first submission
Date of first regulatory approval (for MAA, this is the first EU
approval letter)
Approvable letter indicates that ultimately approval can be given
subject to resolution of deficiencies
Marketing authorisation application (Europe)
New drug application (USA)
Evaluation of clinical pharmacology, usually conducted in volunteers
Determination of dose and initial evaluation of efficacy, conducted in
a small number of patients
Large comparative study (compound versus placebo and/or established
treatment) in patients to establish clinical benefit and safety
160
This maturity in the late stage pipeline is expected to lead to an increase

in registrations in the coming years. The content of the drug
development portfolio will change over time as new compounds
progress from discovery to development and from development to the
market. Owing to the nature of the drug development process, many
of these compounds, especially those in early stages of investigation,
may be terminated as they progress through development. Phase I
NCEs with multiple indications are counted only once. NCEs in later
phases are counted by each indication. For competitive reasons, new
projects in pre-clinical development have not been disclosed and some
project types may not have been identified.
120
149
11
26% of pipeline
118
12
Late-stage
growth
46
19
80
40
25
38
41
29
21
25
2001
2005
0
NCEs Phase III/
registration
NCEs Phase II
10
NCEs Phase I
PLEs
Vaccines
38% of
pipeline

continued
Compound/Product
Type
Indication
Phase
dyslipidaemia
atherosclerosis (also rheumatoid arthritis & chronic

obstructive pulmonary disease, COPD)
prevention of stroke in atrial fibrillation
atherosclerosis (also rheumatoid arthritis & COPD)
atherosclerosis
I
I
I
I
dyslipidaemia
II
dyslipidaemia
prevention of thrombotic complications of cardiovascular
disease
atherosclerosis
treatment of acute coronary syndrome
hypertension & congestive heart failure once-daily
II
II
Estimated filing dates

MAA
NDA
256073
681323
813893
856553
rilapladib
501516
590735
odiparcil
darapladib
Arixtra
Coreg CR
Metabolic projects
625019
716155
856464
radafaxine
189075
677954
869682
denagliptin
solabegron
Avandamet XR
Avandia + simvastatin
Avandaryl
high affinity nicotinic acid receptor

(HM74A) agonist
p38 kinase inhibitor
factor Xa inhibitor
lipoprotein-associated phospholipase A2
(Lp-PLA2) inhibitor
peroxisome proliferator-activator receptor
(PPAR) delta agonist
PPAR alpha agonist
indirect thrombin inhibitor
Lp-PLA2 inhibitor
synthetic factor Xa inhibitor
beta blocker
ll/III
III
Submitted
2006
N/A
2006
S:Dec05
PPAR pan agonist

glucagon-like peptide 1 agonist
melanin concentrating hormone antagonist
noradrenaline/dopamine re-uptake inhibitor
sodium dependent glucose transport (SGLT2)
inhibitor
PPAR pan agonist
SGLT2 inhibitor
dipeptidyl peptidase lV (DPP IV) inhibitor
beta3 adrenergic agonist
PPAR gamma agonist + metformin
PPAR gamma agonist + statin
PPAR gamma agonist + sulphonylurea
type 2 diabetes
type 2 diabetes
obesity
obesity (also fibromyalgia, neuropathic pain & depression)
type 2 diabetes
I
I
I
I
II
type 2 diabetes
obesity
type 2 diabetes
type 2 diabetes (also overactive bladder)
type 2 diabetes extended release
type 2 diabetes
type 2 diabetes fixed dose combination
II
II
II
II
III
III
Approved
S:May05
2007
2007
A:Dec05
oral pleuromutilin
oral pleuromutilin
phospholipid anti-endotoxin emulsion
PPAR gamma agonist
8-aminoquinoline
antifolate + artemisinin
treatment of bacterial infections

treatment of bacterial infections
sepsis
hepatic fibrosis
treatment of visceral leishmaniasis
treatment of uncomplicated malaria
I
I
II
II
II
IIl
2007
N/A
N/A
8-aminoquinoline
topical pleuromutilin
malaria
bacterial skin infections
III
Submitted
2006
S:Nov05
DNA antiviral vaccine

aspartyl protease inhibitor
neuraminidase inhibitor
HIV infection
HIV infection
influenza prophylaxis
I
II
Submitted
S:Nov05
S:Nov05
2007
2007
2007
2006
2007
S:Apr05
2007
2006
AL:Jul05
A:Jan06
Infectious Diseases
565154
742510
270773
farglitazar
sitamaquine
chlorproguanil, dapsone +
artesunate (CDA)
Etaquine
Altabax (retapamulin)
Antivirals
825780
brecanavir
Relenza
Musculoskeletal, Inflammation, Gastrointestinal & Urology

221149
232802
267268
366074
relacatib
751689
768974
786034
842470
876008
dutasteride + testosterone
solabegron
270384
274150
681323
683699
856553
casopitant
oxytocin antagonist
3G-selective oestrogen receptor modulator
vitronectin integrin antagonist
potassium channel opener
cathepsin K inhibitor
calcium antagonist
parathyroid hormone agonist
tyrosine kinase inhibitor
PDE IV inhibitor (topical)
corticotrophin releasing factor (CRF1) antagonist
5-alpha reductase inhibitor + testosterone
beta3 adrenergic agonist
endothelial cell adhesion molecule inhibitor
selective iNOS inhibitor
dual alpha4 integrin antagonist (VLA4)
p38 kinase inhibitor (oral)
NK1 antagonist
mepolizumab
rosiglitazone XR
Avodart + alpha blocker
Avodart
Entereg/Entrareg
mepolizumab
Entereg/Entrareg
Boniva/Bonviva
anti-IL5 monoclonal antibody

PPAR gamma agonist
5-alpha reductase inhibitor + alpha blocker
5-alpha reductase inhibitor
peripheral mu-opioid antagonist
peripheral mu-opioid antagonist
bisphosphonate
threatened pre-term labour

I
treatment of menopausal symptoms
I
age-related macular degeneration
I
overactive bladder
I
osteoporosis & osteoarthritis (also bone metastases)
I
osteoporosis
I
osteoporosis
I
psoriasis
I
atopic dermatitis
I
irritable bowel syndrome (also depression & anxiety)
I
hypogonadism fixed dose combination
I
overactive bladder (also type 2 diabetes)
I
inflammatory bowel disease
II
rheumatoid arthritis (also migraine)
II
rheumatoid arthritis (also atherosclerosis & COPD)
II
inflammatory bowel disease (also multiple sclerosis)
II
rheumatoid arthritis (also atherosclerosis & COPD)
II
overactive bladder (also depression & anxiety,
II
chemotherapy induced & postoperative nausea & vomiting)
eosinophilic esophagitis (also asthma & nasal polyposis)
II
rheumatoid arthritis (also Alzheimers disease)
II
benign prostatic hyperplasia fixed dose combination
III
reduction in the risk of prostate cancer
III
opioid induced GI symptoms
III
hypereosinophilic syndrome (also asthma & nasal polyposis) III
post operative ileus
Approvable
treatment of postmenopausal osteoporosis
Approved
i.v. injection
11
Cardiovascular & Metabolic

continued
Compound/Product
Type
Indication
Phase

MAA
NDA
Neurosciences
163090
189254
234551
406725
644784
737004
823296
842166
876008
radafaxine
274150
372475
468816
683699
705498
742457
773812
casopitant
radafaxine
rosiglitazone XR
talnetant
vestipitant + paroxetine
406381
Lamictal
Lamictal XR
Requip extended release
Requip Modutab/XL
24 hour
Trexima
Wellbutrin XL
Wellbutrin XL
presynaptic mixed 5HT1 antagonist

histamine H3 antagonist
endothelin A antagonist
gap junction blocker
dual-acting COX-2 inhibitor
depression & anxiety

dementia
stroke
migraine, epilepsy & neuropathic pain
acute & chronic pain conditions (including neuropathic
pain) & schizophrenia
endothelin A antagonist
stroke
NK1 antagonist
depression & anxiety
non-cannabinoid CB2 agonist
inflammatory pain
CRF1 antagonist
depression & anxiety (also irritable bowel syndrome)
fibromyalgia & neuropathic pain (also obesity)
selective iNOS inhibitor
migraine (also rheumatoid arthritis)
triple (5HT/noradrenaline/dopamine) re-uptake depression and attention deficit hyperactivity disorder
inhibitor
glycine antagonist
smoking cessation
dual alpha4 integrin antagonist (VLA4)
multiple sclerosis (also inflammatory bowel disease)
transient receptor potential vanilloid-1
acute migraine
(TRPV1) antagonist
5HT6 antagonist
dementia
mixed 5HT/dopaminergic antagonist
schizophrenia
NK1 antagonist
depression & anxiety (also overactive bladder,
chemotherapy induced & postoperative nausea & vomiting)
depression (also obesity)
PPAR gamma agonist
Alzheimer's disease (also rheumatoid arthritis)
NK3 antagonist
schizophrenia
NK1 antagonist + selective serotonin re-uptake depression & anxiety
inhibitor
dual-acting COX-2 inhibitor
acute & chronic pain
sodium channel inhibitor
bipolar disorder acute treatment
sodium channel inhibitor
epilepsy once-daily
non-ergot dopamine agonist
restless legs syndrome
non-ergot dopamine agonist
Parkinsons disease once-daily controlled release
formulation
5HT1 agonist + naproxen
migraine fixed dose combination
seasonal affective disorder
depression
I
I
I
I
I
I
I
I
I
I
II
II
II
II
II
II
II
II
II
II
II
II
III
III
III
III
Submitted
Submitted
Submitted
Approved
N/A
S:Dec05
N/A
2006
2006
2006
2006
2006
S:Aug05
S:Dec04
A:Aug03
2007
2007
Oncology
559448
743921
elacridar
relacatib
casopitant
thrombopoietin agonist
kinesin spindle protein (KSP) inhibitor
oral bioenhancer
cathepsin K inhibitor
NK1 antagonist
casopitant
NK1 antagonist
ethynylcytidine
iboctadekin
ispinesib
pazopanib
selective RNA polymerase inhibitor

recombinant human IL18 immunomodulator
KSP inhibitor
vascular endothelial growth factor (VEGF)
tyrosine kinase inhibitor
NK1 antagonist
thrombopoietin agonist
topo-isomerase I inhibitor
ErbB-2 and epidermal growth factor receptor
(EGFR) dual kinase inhibitor
guanine arabinoside prodrug
vestipitant
eltrombopag
Hycamtin
Hycamtin
Tykerb/Tycerb
Hycamtin
Arranon
Hycamtin
thrombocytopaenia
cancer
cancer
bone metastases (also osteoporosis & osteoarthritis)
postoperative nausea & vomiting
(also overactive bladder, depression & anxiety)
chemotherapy induced nausea & vomiting
(also overactive bladder, depression & anxiety)
solid tumours
immunologically-sensitive cancers (melanoma & renal cell)
non-small cell lung cancer & other tumours
solid tumours
II
II
II
II
postoperative nausea & vomiting

thrombocytopaenia
ovarian cancer first-line therapy
small cell lung cancer second-line therapy oral formulation
breast cancer (also renal, head & neck cancers)
II
III
III
III
III
2006/07
2007
2007
2006/07
2006/07
2007
2007
2006/07
cervical cancer second-line therapy

acute lymphoblastic leukaemia & lymphomas
small cell lung cancer second-line therapy
Submitted
Approved
Approved
2006
2006
A:Jan06
S:Dec05
A:Oct05
A:Nov98
12
I
I
I
I
II
II

continued
Compound/Product
Type
Indication
Phase
256066
656398
856553
870086
961081
159797
PDE IV inhibitor (inhaled)

muscarinic acetylcholine antagonist
novel glucocorticoid agonist
muscarinic antagonist, beta2 agonist
long-acting beta2 agonist
159802
233705
597901
muscarinic acetylcholine antagonist

642444
678007
681323
685698

glucocorticoid agonist
799943
mepolizumab
Avamys/Allermist
Seretide/Advair
Seretide
Ariflo
Seretide/Advair
beta2 agonist/inhaled corticosteroid
PDE IV inhibitor (oral)
asthma, COPD & allergic rhinitis

I
COPD
I
COPD (also atherosclerosis & rheumatoid arthritis)
I
asthma
I
COPD
I
COPD, also COPD & asthma in combination with a
II
II
COPD
II
II
II
II
COPD (also rheumatoid arthritis & atherosclerosis)
II
asthma & COPD in combination with a long-acting
II
beta2 agonist (also allergic rhinitis)
asthma & COPD in combination with a long-acting
II
beta2 agonist
asthma & nasal polyposis (also hypereosinophilic syndrome II
& eosinophilic esophagitis)
allergic rhinitis
III
COPD mortality claim
III
asthma initial maintenance therapy
Submitted
COPD
Approvable
asthma non-CFC inhaler
Approved

MAA
NDA
Respiratory
2006
2006
S:Aug04
A:Jun00
2006
2006
N/A
AL:Oct03
AL:Oct01
& Oct02
Paediatric Vaccines
Hib-MenCY-TT
conjugated
MenACWY-TT
conjugated
Globorix
conjugated
Streptorix
Priorix-Tetra
Rotarix
Menitorix
conjugated
live attenuated
live attenuated oral
conjugated
Neisseria meningitis groups C & Y disease &

Haemophilus influenzae type b disease prophylaxis
Neisseria meningitis groups A, C, W & Y disease
prophylaxis
diptheria, tetanus, pertussis, hepatitis B, Haemophilus
influenzae type b disease, Neisseria meningitis groups
A & C disease prophylaxis
S.pneumoniae disease prophylaxis for children
measles, mumps, rubella & varicella prophylaxis
rotavirus induced gastroenteritis prophylaxis
Neisseria meningitis group C disease & Haemophilus
influenzae type b disease prophylaxis
II
II
lll
2006
lll
Submitted
Submitted
Approved
2007
S:Apr04
S:Dec04
A:Dec05
Other Vaccines
HIV
S. pneumoniae elderly
S. pneumoniae paediatric
(PGCvax)
Varicella Zoster virus
Tuberculosis
Dengue fever
Epstein-Barr virus
Flu improved
Flu intranasal (FluINsure)
Hepatitis E virus
Mosquirix
Cervarix
Fluviral
Simplirix
Flu pandemic
recombinant
recombinant
recombinant
HIV infection prophylaxis

S. pneumoniae disease prophylaxis
S. pneumoniae disease prophylaxis
l
l
l
recombinant
recombinant
attenuated tetravalent vaccine
recombinant
inactivated split-adjuvanted
inactivated split-adjuvanted
recombinant
recombinant
recombinant
inactivated split
recombinant
inactivated whole-aluminium salt adjuvant
Varicella Zoster prevention

tuberculosis prophylaxis
Dengue fever prophylaxis
EBV infection prophylaxis
hepatitis E prophylaxis
malaria prophylaxis
human papilloma virus infection prophylaxis
genital herpes prophylaxis
l
I/II
ll
ll
ll
ll
ll
ll
lll
lll
lll
Submitted
recombinant
recombinant
recombinant
treatment of prostate cancer

treatment of breast cancer
treatment of non-small cell lung cancer & melanoma
l
l/II
ll
Pharmaccines
P501
Her2
MAGE-3
13
2006
S:Dec05
2006
2006

Consumer Healthcare marketing excellence
The structure of this business was redesigned in 2004 in order to focus
on brands and their growth opportunities. For those brands that have
sales in multiple markets a new team called the Future group has
been created to develop a global approach to support these global
brands. For those brands that are large and marketed in several
territories, but generally with one lead market, one anchor market
team leads development of these lead market brands. The remaining
valuable local brands are managed through a new model, which
retains local responsibility for the brand, communications and
innovation. These local enterprise brands are also supported globally
and regionally to ensure the application of best practice and cross
pollination of innovation.
GSK undertakes a range of activities to maximise the commercial

potential of its intellectual property, by introducing innovative products
into as many markets as possible, accelerating the process of bringing
new products to market, increasing brand recognition and ensuring
that patients have access to new medicines. Both the pharmaceutical
and consumer healthcare businesses focus on ways to improve
existing performance through commercial and operational excellence
initiatives. Some of these are:
Worldwide pharmaceutical sales force excellence

GSKs sales force has always ranked high on surveys with healthcare
professionals. Worldwide sales force excellence (WSFE) aims to
improve customer satisfaction even further.
The time available for physicians to learn about new medicines and
clinical studies is precious. Through the WSFE initiative, sales
representatives strengthen product knowledge and learn to deliver
patient-specific treatment options more efficiently and more
effectively. Research shows that a sales visit is highly effective when a
representative engages the physician in dialogue around patient types
and supports the message with visual aids that illustrate clinical results.
Maintaining high standards

GSK expects employees to meet high ethical standards in all aspects
of business by conducting activities with honesty and integrity,
adhering to corporate responsibility principles and complying with
applicable laws and regulations. GSK audits its operations to ensure
relevant standards expected, such as those in marketing practices,
are reached or exceeded.
The Group has introduced a single global sales call model that focuses
on treating the patient through a dialogue about when a GSK
medicine is appropriate, why it is effective and how to administer
it safely. All field people in the Groups key markets had been trained
in the new When? Why? How? approach. The entire sales
organisation is now involved in WSFE to bring about a cultural change
that raises ethical standards and helps build long-term, trusting
relationships with the healthcare community.
Commitment to the GSK Code of Conduct is reinforced each year by

a senior management certification programme, and in 2005 over
12,000 managers certified they had complied with Performance
with Integrity principles.
Patient advocacy
The Patient advocacy initiative has demonstrated significant progress
since its inception in 2002. The rationale for the strategy centres on
enhancing access for the Groups medicines by connecting with
patient groups to ensure that they are informed of disease treatments,
as well as improving GSKs reputation as a patient-centric group.
Pharmaceutical marketing excellence

Large numbers of patients suffering the effects of their disease
continue to be unable to benefit from innovative medicines and
treatments. One of GSKs goals is to provide accurate and balanced
information on the Groups products to allow as many people as
possible to benefit from GSKs medical advances. For example within
Europe, around 50% of patients suffering from Chronic Obstructive
Pulmonary Disease (COPD) are diagnosed and, of those, only 60%
receive regular maintenance drug therapy. GSKs marketing initiative
implements programmes to overcome the barriers to proper diagnosis
and treatment. As these programmes begin to show effects, the
societal costs of disease will decrease. To the extent that a GSK product
is chosen for patients treatment, the Group will benefit as well.
Initially launched as a US programme, it is now a critical initiative in

strategic plans throughout the world. Patient advocacy teams in the
USA and Europe have shared best practices and established processes
to optimise interaction with patient groups. In 2005, Patient advocacy
Leaders Summits were held in the USA, Europe and Canada, with
over 1,000 patient advocates attending GSK sponsored meetings
throughout the world. Two diabetes summits were held with minority
legislative groups in the USA in the hopes of developing a base for
future legislation and awareness activities.
Vision Factory
GSK introduced the Vision Factory initiative in Global Manufacturing
and Supply which is identifying improvements in productivity and cost
reduction. This will increase operational excellence in the
manufacturing operations to ensure product quality and patient safety
are paramount.
Marketing codes
GSK is committed to ethical, responsible and patient-centred
marketing. The Groups Pharmaceutical Marketing and Promotional
Activity policy governs marketing activities and apply to all
employees, suppliers, contractors and agents. This policy requires
that all marketing and promotional activities are based on valid
scientific evidence, and comply with applicable laws and regulations.
Procurement
GSK non-production operations are supported by a number of third
party purchases; worldwide this covers all areas including media,
travel, R&D, IT and marketing. These purchases are managed by
procurement, on behalf of their internal customers, and covers
assurance of supply, service, quality, cost and innovation. Widely
recognised by industry analysts as a global best practice leader,
procurement works collaboratively with the business to develop and
implement sourcing strategy that ensures GSK receives best value
when buying goods and services.
This policy is supported by regional marketing practices codes in

Europe, GSKs International region, Japan and the USA. These codes
apply the same ethical standards but reflect differences in market
structures, national healthcare systems and regulations. They
incorporate the principles of industry codes of practice such as the
European Federation of Pharmaceutical Industries Associations, the
International Federation of Pharmaceutical Manufacturers Associations,
Japan Pharmaceutical Manufacturers Association and Pharmaceutical
Research and Manufacturers of America marketing codes.
14

Access to healthcare in the developing world
While much was achieved in 2005, sustainable progress will only occur
if the significant barriers that stand in the way of better access to
healthcare are tackled as a shared responsibility by all sectors of global
society governments, international agencies, charities, academic
institutions, the pharmaceutical industry and others.
Access to healthcare in developing countries remains a major

challenge to the global community. The problem, which is rooted in
poverty and a lack of political will, continues to demand a significant
mobilisation of resources and a true spirit of partnership. GSK
continues to play a vital role, through its commitment to R&D into
diseases particularly prevalent in the developing world, through its
programme of preferential pricing for its anti-retrovirals (ARVs), antimalarials and vaccines, through its community investment
programmes and through its willingness to seek innovative solutions,
such as voluntary licencing arrangements.
Programmes in the USA

GSK is working to provide meaningful access to medicines for people
with limited financial resources and without prescription drug
insurance. In 2005, GSKs US patient assistance programs provided
$464 million worth of medicines, valued at wholesale acquisition cost,
to 565,000 qualifying low income US residents.
Preferential pricing programme

GSK has offered its vaccines to key organisations for vaccination
programmes in developing countries at preferential prices for over
20 years. The Group also sets a single not-for-profit price for each
of its ARVs and anti-malarials to a wide range of customers in the
Least Developed Countries (UN definition) and sub-Saharan Africa,
as well as Country Coordinating Mechanism-projects fully funded
by the Global Fund to Fight AIDS, TB, and Malaria and the US
Presidents Emergency Plan for AIDS Relief (PEPFAR).
For uninsured Americans who do not qualify for Medicare or

Medicaid, GSK and 11 other pharmaceutical companies created
Together Rx Access, a programme for qualified individuals offering
reductions in the usual pharmacy cost on more than 275 medicines.
Launched in 2005, there are over 353,000 Together Rx Access
cardholders, who saved about $10.1 million in 2005.
GSK participates in the Partnership for Prescription Assistance (PPA),
the largest national programme dedicated to helping people in need
access prescription medicines. PPA has matched more than one million
US patients in need to programs providing significant help. GSK and
other US pharmaceutical companies launched the program in 2005
in partnership with healthcare, physician and patient advocacy
organisations.
GSK is committed to contributing to health improvements in a

sustainable manner. The prices for its ARVs and anti-malarials are
therefore set at levels at which no profit is made, but direct costs are
covered, allowing supply to be sustained for as long as required.
During 2005, GSK shipped to developing countries over 45 million
tablets of preferentially-priced Combivir and over 81 million tablets of
preferentially-priced Epivir.
Programmes in other countries

The Group has also introduced Orange Cards providing discounts
on certain GSK prescription medicines for eligible patients in Bulgaria,
Lithuania and Ukraine. The nature of the discounts varies between
countries, depending on the needs of the patient and the way in
which the healthcare system operates.
The offer of not-for-profit prices requires a sustainable framework,

combining GSKs commitment to preferential pricing with
commitments from governments of the developed world to avoid
price referencing against preferentially priced medicines and to help
prevent product diversion. GSK has taken steps to minimise the
threat of diversion. Retrovir syrup, Epivir solution, Combivir, Epivir
tablet and Trizivir are now available in special access packs in more
than 50 countries. Differentiated red (as opposed to traditional
white) Combivir and Epivir tablets are now registered across a
number of International markets. GSK is the only company to have
registered its ARVs under the European Unions Anti-Diversion
Regulation. During 2005, it also continued to encourage other
countries to take the necessary steps to ensure the introduction
and strict enforcement of appropriate anti-diversion measures.
Preparing for a flu pandemic

The Group is committed to doing everything it can to support
governments and health authorities around the world in planning
responses to a possible global influenza pandemic. GSK was the first
company to submit a mock-up dossier to the EMEA to apply for
a pandemic influenza vaccine marketing authorisation in the EU,
which allows for an accelerated final registration once a pandemic
is declared. GSK is also developing an H5N1 prototype pandemic
vaccine and clinical trials testing of this vaccine against the H5N1 flu
strain are taking place in 2006. To increase the performance of its
prototype pandemic vaccine, GSK has developed an innovative
adjuvant that may allow lower amounts of antigen to be used, which
is essential for manufacturing large number of doses in the event of
a pandemic.
Innovative solutions
GSK has shown industry leadership in granting voluntary licences to
seven generic companies for the manufacture and supply of ARVs to
both the public and private sectors in sub-Saharan Africa.
Looking ahead
GSK will continue to build on its products, pricing and partnership
commitments to help improve healthcare in the developing world.
However, a significant increase in funding from the global community
is still needed. It is also important to maintain incentives for R&D
through protection of intellectual property.
15
Access to medicines in the developed world
GlaxoSmithKline people
The Group is committed to employment policies free from

discrimination against potential or existing staff on the grounds of
age, race, ethnic and national origin, gender, sexual orientation, faith
or disability. GSK is committed to offering people with disabilities
access to the full range of recruitment and career opportunities. Every
effort is made to retain and support employees who become disabled
while working with the Group.
GlaxoSmithKline is committed to creating the best place for the best

people to do their best work to deliver the Groups business strategy.
The Group employs over 100,000 people in over 116 countries.
Recruitment, talent management and leadership

development
Attracting the best people in the industry is critical to enhancing and
sustaining GSKs performance. The Groups recruiters in the USA and
UK are focussed on pro-active identification of talented external
candidates for key jobs, acting as an internal headhunting function.
Communication and employee involvement

Good internal communication is important in achieving GSKs business
objectives as well as creating an open and inclusive work environment.
There are a range of communication channels to keep employees
up-to-date with GSKs news and enable them to give feedback. These
include:
The annual performance and development planning (PDP) process

ensures that employees set objectives aligned with corporate
strategies, set behavioural goals and create a development plan. PDPs
are reviewed throughout the year, culminating with an end of year
review that is factored into compensation decisions.
myGSK, the global intranet site, provides news and updates and a
Q&A section where employees put questions directly to the Chief
Executive Officer and other senior executives. Up to 100 questions
are answered each month. Behind the News, a section of the GSK
intranet, gives the Groups position on important issues linked to
press stories about GSK
Spirit, GSKs internal magazine, reaches around 50,000 employees
throughout the world four times a year
confidential feedback mechanisms enable employees to raise
concerns. These include GSKs integrity helpline.
The annual talent management cycle identifies the highest performing

people in each business and function. Individuals are given feedback
on development needs and key talent is developed through
exceptional management and leadership programmes (for more detail
see the Groups Corporate Responsibility Report), exposure to top
management through programmes such as the Chief Executive Forum
and via stretch assignments. A pool of successors is identified for all
Vice-President positions and other critical roles in the organisation.
The Group conducts a Global Leadership Survey (GLS) every two years.
The last GLS was conducted in 2004 among more than 10,000
managers to gauge opinion on critical issues such as culture and
confidence in the Groups future. Results showed significant
improvement on 29 of 31 items compared with 2002 results.
Compared with global benchmarks, managers rate highly on fostering
alignment between personal goals and the GlaxoSmithKline mission
and fostering an environment of ethics and integrity. In the survey,
80% of managers were proud to be part of GlaxoSmithKline and
would gladly refer a friend or family member to work for GSK.
Performance and reward

Reward systems are designed to support a culture of high
performance and to attract and retain the best people. Performance
based pay, share awards and share options align employee interests
with the accomplishment of business targets.
Business ethics and reputation
Performance with Integrity is central to operating at GSK. The most
recent Global Leadership Survey showed over 90% believe that
people in their department show commitment to performance with
integrity. To enhance managers and leaders skills a programme on
ethical decision making was run in 2005, attended by 479 people.
Further training in this area is planned for 2006.
Between Leadership Surveys many business areas conduct surveys of

all employees to gauge levels of engagement, satisfaction and
motivation. Each business and function has developed action plans
to address areas for improvement based on results from the GLS and
these other surveys.
The PDP process includes an assessment of how well employees have

implemented the GSK Spirit the principles used to define the Groups
culture. This can have a significant impact on bonus payments,
potentially reducing them to zero if an employee is found not to have
followed the Spirit, and can also affect future career development. In
this way the Group holds employees accountable for delivering
performance with high standards of integrity to protect and enhance
GSKs reputation.
The Group also consults employees on changes that affect them and
discusses developments in the businesses with the European
Employee Forum and similar committees in countries where this is
national practice.
Health and well-being

Healthy employees and healthy ways of working contribute to GSKs
sustained performance. Global policies on Employee Health are
supported by mandatory standards that integrate employee health
and safety and environmental requirements. These standards are
applied to all the Groups facilities and operations worldwide.
Diversity
The GSK diversity initiative focuses on improving performance by
responding to the diverse needs of employees, customers and external
stakeholders. At the third annual Multicultural Marketing and Diversity
Awards, 60 entrants from the USA, UK and Continental Europe
highlighted innovative activities that demonstrated business impact.
In 2005, the global management population was 64.5% male and
35.5% female. For more details on diversity measures, see the
Employment Practices section of the Corporate Responsibility report.
A commitment to flexible working through flexi-time, teleconferencing, remote working and flexible work schedules, recognises
that employees work best in an environment that helps them integrate
their work and personal lives. During 2005 the Groups Employee
Health Management function won Personnel Todays Managing Health
at Work award in the UK in recognition of its impact in promoting a
healthy workplace.
16
New product and global supply

New product and global supply focuses on ensuring that the
appropriate technical competencies exist to support rapid and
successful new product introduction. It works closely with R&Ds
development team to do this. It also ensures secure supply of the key
brands that are sold across many markets and have global distribution.
This division is the focal point for developing and introducing new
secondary manufacturing technologies for GMS. It co-ordinates with
Primary supply operations to ensure alignment between the two
divisions and a full value stream approach to introducing new
products. There are eight sites in six countries in New product and
global supply.
GSK has a large portfolio of products, ranging from tablets and

toothpaste to inhalers and complex capsules, in over 28,000 different
pack sizes and presentations.
Manufacture of medicines begins with the development of a
therapeutic active ingredient (bulk active) in a selected formulation.
Global Manufacturing and Supply (GMS) develops manufacturing
processes for full scale volume production of active compounds at
primary manufacturing sites. Converting active compounds into a
finished dosage formulation is the responsibility of the secondary
manufacturing sites.
GMS operates as a single global network of 80 sites in 37 countries.
Each year GMS produces around 6,000 tonnes of bulk actives and
over four billion packs, which are packaged and delivered for sale in
over 160 countries. Throughout the world it also supports about
2,000 new product and line extension launches a year.
Operational excellence
GMS has developed a set of measures and a uniform way of working
to drive business improvement. These activities are mainly focused on
increasing the quality of products supplied to customers. Extensive
leadership education has been carried out to reinforce a culture of
continuous improvement, with staff involved in solving problems in a
rigorous, controlled and structured way. All this has provided the
capability to improve significantly performance, and to accelerate
delivery of benefits across the manufacturing network.
By adopting leading edge practices and developing its people GMS

expects to derive benefits from:
a secure source of supply of high quality products
compliance with regulatory requirements and customer expectations
best in class cost.
Since the formation of GSK, merger rationalisation and operational

excellence initiatives have reduced the number of manufacturing sites
by 35 (30%).
Organisation
Supply divisions
There are four supply divisions, with sites grouped together based
upon common business drivers, areas of expertise and the commercial
activities that they support. These four divisions are described below:
External suppliers
Manufacturing spends over 2 billion with many external suppliers
every year, including on the purchase of active ingredients, chemical
intermediates and part-finished and finished products. GMS takes
appropriate steps to protect its supply chains from any disruption
resulting from interrupted external supply through appropriate stock
levels, contracting and alternative registered suppliers.
Primary supply and Antibiotics

Primary supply and Antibiotics focuses on ensuring the supply of high
quality and competitively priced bulk actives and on driving
improvements in primary technologies and processes. It also supports
the delivery of maximum value from the antibiotics franchise through
a combined primary and secondary approach to cost competitive
supply and response to market opportunities and customer needs.
There are 17 sites in eight countries in Primary supply and Antibiotics.
Vaccines supply chain

In Europe, vaccine manufacturing is located primarily at Rixensart and
Wavre in Belgium, with three other sites in France, Germany and
Hungary. In 2005, GSK strengthened its global production network
in North America through three major acquisitions: US based Corixa
Corporation, which produces an important component in many of
GSKs vaccines under development, a vaccine production site in
Marietta, Pennsylvania and ID Biomedical with flu vaccine
manufacturing facilities in Canada. In Asia, new vaccine production
facilities are being built in India and Singapore. GSKs vaccine division
also has two joint ventures in China and Russia. Managing the vaccine
supply chain involves anticipating market needs and using a flexible
approach to be able to meet fluctuations in demand. These are based
on forecasts from the different markets and firm orders from health
authorities for mass vaccination campaigns.
Consumer Healthcare supply

Consumer Healthcare supply focuses on delivering high quality,
competitively produced products and offering the capability for rapid
new product introduction in a highly innovative and competitive
business which has far shorter time frames than pharmaceuticals.
New technologies have become a fundamental platform for lowering
costs and providing flexibility in operations. There are 24 sites in 17
countries in Consumer Healthcare supply.
Regional pharma supply
Regional pharma supply focuses on several key activities, the supply
of products that are key in one or more regions, the supply of products
that are important in a particular market and the tailoring of
packaging to meet specific local requirements. A key focus for the
regional pharma supply team is on reducing costs so that GSK can
compete more effectively in all its markets. There are 31 sites in 23
countries in Regional pharma supply.
Bulk, filling and packaging are carefully balanced and stocking of

vaccines helps manage short-term increases in demand. Such
increases result from disease outbreaks or increased demand from
the public owing to disease awareness campaigns.
17

Commit to corporate responsibility
In the UK, GSK contributed 4 million in 2005 to its continuing

corporate programme of charitable activities supporting over 80
organisations in health, medical research, science education, the arts
and the environment. In addition, Group companies in the UK
provided a further 8 million for charitable purposes.
GSK is committed to connecting business decisions to ethical, social

and environmental concerns. Thus, corporate responsibility is an
integral and embedded part of the way GSK does business.
In 2003, GSK published a set of Corporate Responsibility principles to
provide guidance on the standards to which the Group is committed.
This sets out the approach to ten areas: standards of ethical conduct,
research and innovation, products and customers, access to
medicines, employment practices, human rights, community
investment, caring for the environment, leadership and advocacy, and
engagement with stakeholders. The Group reports annually on
progress in upholding these principles in its Corporate Responsibility
Report, which is available on the website at www.gsk.com.
Corporate programmes in North America focused on improving

public education and access to better healthcare for children and
seniors with funding of almost 8 million. In addition, the Groups
US-based businesses donated 14 million to regional community
activities.
GSK does not operate a single charitable foundation for its community
investment programmes, but has a number of country based
foundations. The grants made by these foundations in 2005 are
included in the investment total.
Partnership success
GSK works as a partner with under-served communities in the
developed and developing world. It supports programmes that are
innovative and sustainable and that bring real benefits to these
communities. The Group engages with numerous external
stakeholders, funds community-led initiatives around the world and
donates medicines to support humanitarian efforts and community
based healthcare.
Global Health Programmes

Eliminating lymphatic filariasis
The Groups effort to help rid the world of the disabling disease,
lymphatic filariasis (LF), continued in close partnership with the
governments of countries where the disease is endemic, the WHO
and over 40 partner organisations. GSK is committed to donate as
much of the anti-parasitic drug albendazole as required to treat the
one billion people at risk in 80 countries by 2020. In 2005, 136
million albendazole treatments, worth over 14 million at wholesale
acquisition cost, were donated to 36 countries. Since the global
elimination programme started in 2000, a cumulative total of 442
million albendazole treatments have been donated and the
programme is now reaching over 100 million people. During 2005,
GSK opened a new $3 million manufacturing facility in Cape Town,
South Africa to produce albendazole.
GSKs global community investment activities in 2005 were valued
at 380 million, equivalent to 5.6% of Group profit before tax. This
comprised product donations of 296 million, cash giving of 61
million, other in-kind donations of 2 million and costs of 21
million to manage and deliver community programmes in more than
100 countries.
Positive Action on HIV/AIDS

Positive Action is GSKs pioneering global programme working with
communities affected by AIDS. Started in 1992, it supports
community-based organisations to deliver effective HIV and AIDS
education, prevention and healthcare services. During 2005, Positive
Action worked with 29 partners to support programmes in 30
countries. The programme also supported the participation of
community involvement at regional and international AIDS
conferences.
Product donations and cash giving in 2005 were as follows:

1. Product donations
3
2
1 Patient Assistance Programs

255 million
2 Albendazole for LF
14 million
3 Humanitarian Product Donations
27 million
The GlaxoSmithKline African Malaria Partnership

Since 2002, this partnership has supported three behavioural
development programmes working in eight African countries. The
programmes are targeting nearly two million people and focus
particularly on young children and pregnant women, encouraging
effective prevention measures, prompt treatment and antenatal
malaria management. Extending this programme in 2005, the Group
announced a three-year grant of 900,000 to the Malaria
Consortium for a new initiative Mobilising for Malaria. Through
increased and sustained advocacy activities in the UK, Europe and
African countries, the programme aims to increase awareness of
malaria and mobilise resources.
GSKs cash giving was targeted primarily at health and education

initiatives.
2. Breakdown of cash giving

5
1 Health (40%)
1
4
3
2 Education (35%)
3 Arts and Culture (3%)
4 Environment (1%)
5 Other (21%)
18

continued
PHASE
The PHASE initiative (Personal Hygiene And Sanitation Education),
initiated by GSK in 1998, is now providing education to thousands
of school children in Kenya, Uganda, Zambia, Nicaragua and Peru
to improve their health and hygiene to fight infectious diseases. In
2005 the Group committed three year funding of 300,000 to
extend the programme to Bangladesh in partnership with Save the
Children, USA.
During 2005 GSK led a group of companies to come together to

create the US Business Education Network (BEN). BEN is a new
business coalition staffed by the Center for Corporate Citizenship of
the US Chamber of Commerce, and is dedicated to harnessing the
power of the business community to address issues facing the US
education system.
Humanitarian product donations

During 2005, GSK donated essential products, such as antibiotics,
through non-profit partners including AmeriCares, MAP International
and Project HOPE, to support humanitarian relief efforts and
community healthcare. In December 2004, medicines donated by the
Group were among the first to be shipped to support the south Asia
tsunami relief efforts. In 2005, GSK continued to donate these lifesaving medicines to tsunami-affected countries and to those affected
by other disasters, including hurricanes in the USA.
GSK continued to support the Innovative Scheme for Post-docs in

Research and Education (INSPIRE), developed in partnership with
Imperial College London and the Specialist Schools and Academies
Trust, with a 1 million donation over four years. INSPIRE places
post-doctoral researchers in specialist science schools to assist with
science teaching.
In 2005 the total value of the Groups international humanitarian

product donations was 27 million. This excludes albendazole donated
as part of the Groups commitment to the lymphatic filariasis
elimination programme. Product donations are valued at wholesale
acquisition cost which is the wholesale list price, not including
discounts, and is a standard industry method.
Science in the Summer, a free library-based science education

programme in the Philadelphia area teaching basic scientific concepts,
continued to receive support with a grant of $300,000. Science Across
the World is an award-winning international education programme
that uses web-based resources to promote discussion of science issues
between 3,600 teachers, 100,000 children and schools in more than
115 countries. A further grant of 110,000 was made in 2005
bringing GSKs total contribution to this programme to 670,000 over
five years.
Community initiatives
GSK is dedicated to strengthening the fabric of communities where
we live and work through providing health and education initiatives
and support for local civic and cultural institutions that improve the
quality of life.
Employee involvement
GSK employees are encouraged to contribute to their local
communities through employee volunteering schemes. Support
varies around the world, but includes employee time, cash
donations to charities where employees volunteer and a matching
gifts programme.
GSKs contribution to improve healthcare includes a new grant of

$2.65 million over three years to the Childrens Health Fund to expand
their Referral Management Initiative (RMI) to sites in Philadelphia,
including the Delaware Valley Community Health Center. The RMI
ensures continuity of specialist medical care for high-risk children who
are often homeless.
In 2005 in the USA, the Group matched more than 20,000 employee
and retiree gifts at a value of over $5 million. The Group also matched
more than $1.3 million of employee donations to GSKs annual
United Way campaign. GSKs GIVE program provided grants of over
$300,000 to more than 350 organisations where US employees have
volunteered.
The annual Impact Awards recognise excellence in the work of nonprofit community health organisations across the UK and in the
Greater Philadelphia area of the USA. Over 20 charities receive
unrestricted awards for their work dealing with diverse issues such as
domestic and community violence, sexual health services for young
people and bereavement and counselling services.
GSKs Making a Difference programme in the UK provided grants of

almost 300,000 to over 440 non-profit organisations and registered
charities based on employee involvement.
To further medical research, over 470,000 was provided to four UK

medical charities, The Alzheimers Research Trust, The British Liver
Trust, Meningitis UK and The Samantha Dickson Research Trust for
childhood brain tumours.
As part of GSKs support for the arts, the Group sponsored the popular
Gardens of Glass: Chihuly at Kew , an innovative exhibition of the
work of Dale Chihuly, the contemporary glass artist, at the Royal
Botanic Gardens, Kew near London.
19
Education initiatives
GSKs efforts to improve public and science education included a
three-year grant of $300,000 to the National Board for Professional
Teaching Standards to increase the number of science teachers
pursuing certification in the North Carolina and Philadelphia areas.

Pharmaceutical products
Anti-virals
Combivir, a combination of Retrovir and Epivir, has consolidated the
position of these two reverse transcriptase inhibitors as the
cornerstone of many multiple anti-HIV product regimens. Physician
acceptance has clearly demonstrated the value placed on minimising
the pill burden faced by patients.
GlaxoSmithKlines principal pharmaceutical products are currently

directed to nine therapeutic areas. An analysis of sales by these
therapeutic areas, and a description of the principal products, are
set out below:
Turnover by therapeutic area

Respiratory
Central nervous system
Anti-virals
Anti-bacterials/anti-malarials
Metabolic
Vaccines
Oncology and emesis
Cardiovascular and urogenital
Other
2005
m
2004
m
2003
m
5,054
3,219
2,598
1,519
1,495
1,389
1,016
1,331
1,040
4,394
3,462
2,359
1,547
1,251
1,194
934
932
1,027
4,390
4,446
2,345
1,800
1,077
1,121
1,000
770
1,165
18,661
17,100
18,114
Ziagen is a reverse transcriptase inhibitor. The products potency, ease

of use and resistance profile allow it to play a significant role in a
variety of highly active, well tolerated and simplified HIV treatment
regimens.
Trizivir is a combination of Combivir and Ziagen, combining three antiHIV therapies in one tablet, for twice daily administration.
Epzicom/Kivexa, approved for use in the USA and Europe, is a
combination of Epivir and Ziagen that is taken as one tablet with
once-daily dosing for HIV/AIDS in combination with at least one other
anti-HIV drug.
Sales in 2005 were 8% higher in CER terms and 9% in sterling terms

than in 2004.
Lexiva/Telzir is a protease inhibitor for the treatment of HIV that is

well tolerated and more convenient than Agenerase which it
supersedes. Lexiva may be taken twice daily or once daily when
boosted with ritonavir.
Products and all their formulations may not be approved for all
indications in all markets where they are available.
Zeffix has been approved for marketing in the USA, Europe, China and
other markets for the treatment of chronic hepatitis B.
Respiratory
Seretide/Advair, a combination of Serevent and Flixotide, offers a longacting bronchodilator and an anti-inflammatory in a single inhaler. It
is approved for the treatment of asthma and COPD.
Valtrex is a treatment for episodic genital herpes as well as the long

term suppression and reduction of transmission of genital herpes,
zoster (shingles), cold sores and chicken pox. Valtrex supersedes
Zovirax, which is also used to treat herpes infections.
Flixotide/Flovent and Becotide/Beclovent are inhaled steroids for the

treatment of inflammation associated with asthma and COPD.
Anti-bacterials and anti-malarials

Augmentin is a broad-spectrum antibiotic suitable for the treatment
of a wide range of common bacterial infections and is particularly
effective against respiratory tract infections. Augmentin ES-600 is an
extra strength suspension specifically designed to treat children with
recurrent or persistent middle ear infections. Augmentin XR is an extra
strength tablet form for adults to combat difficult to treat infections.
Serevent is a long-acting bronchodilator used to treat asthma and

COPD, and Ventolin is a selective short-acting bronchodilator used to
treat bronchospasm.
Flixonase/Flonase and Beconase are steriod intra-nasal preparations for
the treatment of perennial and seasonal rhinitis.
Zinnat is an oral antibiotic used primarily for community-acquired

infections of the lower respiratory tract.
Central nervous system (CNS)

Seroxat/Paxil is a selective serotonin re-uptake inhibitor (SSRI) for the
treatment of depression, panic, obsessive compulsive disorder, post
traumatic stress disorder, social anxiety disorder, premenstrual
dysphoric disorder and generalised anxiety disorder.
Malarone is an oral anti-malarial used for the treatment and

prophylaxis of malaria caused by Plasmodium falciparum.
Lapdap is an effective and well tolerated therapy for the treatment of
malaria, which has been developed through a public/private
collaboration.
Wellbutrin is an anti-depressant, available in the USA and some

international markets in normal, sustained-release (SR) and once daily
formulations.
Imigran/Imitrex is a 5HT1 receptor agonist used for the treatment
of severe or frequent migraine and cluster headache and has become
the reference product in this sector. Naramig/Amerge is a newer
migraine product.
Lamictal, a well established treatment for epilepsy, is now also
indicated for bipolar disorder.
Requip is a specific dopamine D2/D3 receptor agonist indicated for
the treatment of Parkinsons disease and is the first approved product
for Restless Leg Syndrome (RLS).
20

continued
Metabolic
Avandia is a potent insulin sensitising agent which acts on the
underlying pathophysiology of type 2 diabetes.
Oncology and emesis

Zofran is used to prevent nausea and vomiting associated with
chemotherapy and radiotherapy for cancer, and is available in
both oral and injectable forms. It is also approved for use in the
prevention and treatment of post-operative nausea and vomiting.
Avandamet is a combination of Avandia and metformin HCI; it is the

first medicine that targets insulin resistance and decreases glucose
production in one convenient pill.
Avandaryl is a fixed-dosed combination of Avandia and Amaryl, a
Sanofi-Aventis product.
Bexxar is a treatment for patients with CD20 follicular, nonHodgkins lymphoma with and without transformation whose
disease is refractory to rituximab and who have relapsed following
chemotherapy.
Bonviva/Boniva is a once-monthly oral bisphosphonate for the

treatment of osteoporosis. It was launched in the USA and several
EU markets in 2005.

Coreg is an alpha/beta blocker which has been proven to be effective
in treating patients with mild, moderate and severe heart failure, heart
attack or hypertension. GSK has sole marketing rights in the USA and
Canada. Generic versions of the product are available in Canada.
Vaccines
GSK markets over 25 vaccines worldwide. In GSKs hepatitis vaccines
range, Havrix protects against hepatitis A and Engerix-B against
hepatitis B.
Twinrix is the only available combined hepatitis A and B vaccine,
protecting against both diseases with one vaccine and available in
both adult and paediatric strengths. In 2005, GSK received European
approval for Fendrix, a vaccine to prevent hepatitis B in patients with
renal insufficiency including high-risk groups such as prehaemodialysis and haemodialysis patients, from 15 years of age
onwards.
Levitra is a PDE-5 inhibitor indicated for male erectile dysfunction.

GSK has co-promotion rights in the USA and more than 20 other
markets.
Avodart is a 5-ARI inhibitor currently indicated for benign prostatic
hyperplasia. A large clinical outcome study is underway examining its
efficacy in the prevention of prostate cancer.
Fluarix is indicated for prevention of certain types of influenza. It is

distributed in 79 countries and was approved in the USA in 2005.
Fluarix is the first vaccine to receive FDA approval under the agencys
accelerated approval regulations.
Arixtra and Fraxiparine were acquired in 2004 as part of the

divestitures required for the merger of Sanofi and Aventis.
Arixtra, a selective Factor Xa inhibitor, is indicated for the prophylaxis
of deep vein thrombosis, which may lead to pulmonary embolism, in
hip fracture surgery, knee replacement, hip replacement surgery and
abdominal surgery. It is also indicated for the treatment of deep vein
thrombosis and pulmonary embolism.
Infanrix is GSKs range of paediatric vaccine combinations. Infanrix

provides protection against diphtheria, tetanus and pertussis
(whooping cough). Infanrix PeNta/Pediarix provides additional
protection against hepatitis B and polio, and Infanrix hexa further
adds protection against Haemophilus influenzae type b, which is a
cause of meningitis. In 2005, GSK launched Boostrix in the USA, a
vaccine that adds protection against pertussis (whooping cough) to
the routine tetanus/diptheria booster administered to teenagers.
Fraxiparine is a low-molecular weight heparin indicated for

prophylaxis of thromboembolic disorders (particularly deep vein
thrombosis and pulmonary embolism) in general surgery and in
orthopedic surgery, treatment of deep vein thrombosis and
prevention of clotting during hemodialysis.
GSK also markets Priorix, a measles, mumps and rubella vaccine,

Typherix, a vaccine for protection against typhoid fever, and Varilrix,
a vaccine against varicella or chicken pox. In addition, the Group
markets a range of vaccines to prevent meningitis under the
umbrella name Mencevax. GSK recently received approval in the
UK for a new Hib-MenC vaccine, Menitorix. GSKs meningitis
vaccine portfolio wil be complimented by new meningitis conjugate
vaccines in the near future.
Integrilin is a GP IIb-IIIa inhibitor, approved in the EU for the

prevention of early myocardial infarction in patients with unstable
angina or non-Q-wave MI.
Other
This category includes Betnovate, the higher potency Dermovate and
the newer Cutivate, which are anti-inflammatory steroid products
used to treat skin diseases such as eczema and psoriasis, Relafen, a
non-steroidal anti-inflammatory drug for the treatment of arthritis,
and Zantac, for the treatment of peptic ulcer disease and a range
of gastric acid related disorders.
As part of its paediatric franchise, GSK has also developed a vaccine

against rotavirus induced gastroenteritis. Since its launch in Mexico in
2005, Rotarix has been licensed in several additional countries
worldwide among them a number of Latin American countries
including Brazil, with the Philippines and Singapore being the first
Asian countries.
21
Hycamtin is a second line treatment both for ovarian cancer and

for small cell lung cancer.

continued
Pharmaceuticals competition
Anti-virals
GSK is a pioneer in the HIV market, launching AZT (Retrovir) in 1987
and Epivir in 1995, which today are available as Combivir in a single
tablet, a cornerstone of HIV combination therapy. The launches of
Ziagen, Agenerase, Trizivir, Lexiva and Epzicom have broadened
the Groups portfolio of HIV products. Major competitors in the HIV
market include Gilead, Bristol Myers Squibb, Abbott, Merck and Pfizer.
The pharmaceutical industry is highly competitive. GSKs principal

competitors range from small to large international pharmaceutical
companies with substantial resources. Some of these companies and
their major products are mentioned below.
Pharmaceuticals may be subject to competition from other products
during the period of patent protection and, once off patent, from
generic versions. The manufacturers of generic products typically
do not bear significant research and development or education and
marketing development costs and consequently are able to offer their
products at considerably lower prices than the branded competitors.
A research and development based pharmaceutical company will
normally seek to achieve a sufficiently high profit margin and sales
volume during the period of patent protection to repay the original
investment, which is generally substantial, and to fund research for the
future. Competition from generic products generally occurs as patents
in major markets expire. Increasingly patent challenges are made prior
to patent expiry, claiming that the innovator patent is not valid and/or
that it is not infringed by the generic product. Following loss of patent
protection, generic products rapidly capture a large share of the
market, particularly in the USA.
Valtrex has strengthened the Groups position in the anti-herpes area,

where GSKs Valtrex and Zovirax compete with Novartis Famvir.
Valtrex is the market leader, whilst Zovirax faces competition from
generic acyclovir. In the hepatitis B market, GSKs Zeffix was the first
anti-viral on the market. Gileads Hepsera was the second. The Group
has secured marketing rights to Hepsera in some key markets.
Anti-bacterials and anti-malarials

Generic versions of both Augmentin and Ceftin/Zinnat are available
in the USA. Augmentin also faces generic competition in various
European countries. Augmentin XR and Augmentin ES compete
against a broad range of other branded and generic antibiotics.
Malarones safety profile and convenient dosing regimen have
helped put this product in a strong position versus mefloquine for
malaria prophylaxis.
Metabolic
The major competitor for Avandia is Takeda Chemicals Actos, which
is co-promoted with Eli Lilly in the USA.
GSK believes that remaining competitive is dependent upon the

discovery and development of new products, together with effective
marketing of existing products. Within the pharmaceutical industry,
the introduction of new products and processes by competitors may
affect pricing levels or result in changing patterns of product use.
There can be no assurance that products will not become outmoded,
notwithstanding patent or trademark protection. In addition,
increased government and other pressures for physicians and
patients to use generic pharmaceuticals, rather than brand-name
medicines, may increase competition for products that are no longer
protected by patent.
Monthly Boniva/Bonviva competes with Mercks weekly Fosamax and

Proctor & Gamble/Sanofi-Aventiss weekly Actonel. Generic Fosamax
(alendronate) is available in a few markets such as the UK and Canada.
Vaccines
The vaccine market is dominated by four key players. GSKs major
competitors include Sanofi Pasteur (SP), Merck and Wyeth. In the
hepatitis market, Engerix-B and Havrix compete with vaccines
produced by SP and Merck respectively Comvax and Recombivax HB
for hepatitis B, and Vaqta and Avaxim for hepatitis A. Within the
paediatric vaccine field, Infanrixs main competitor is SPs range of
DTPa-based combination vaccines, although the Infanrix hexa
combination is the only available hexavalent paediatric combination
in Europe.
Respiratory
GSKs respiratory franchise is driven by the growth of Seretide/Advair,
gaining patients from competitor products and the cannibalisation of
Serevent and Flixotide/Flovent. Major respiratory competitors are
Singulair from Merck, especially in the USA and in Europe, Symbicort
from AstraZeneca and Spiriva from Pfizer/ Boehringer Ingelheim.
Oncology and emesis

Zofran presently provides GSK with a leadership position in the antiemetic market where competitor companies include Roche, SanofiAventis and more recently MGI and Merck. Major competitors in the
diverse cytotoxic market include Bristol Myers Squibb, Sanofi-Aventis,
Pfizer and Novartis. GSKs cytotoxic portfolio, led by Hycamtin,
currently holds a relatively small market position.
CNS disorders
Major competitors in the USA to Paxil are its generic forms, as well
as generic fluoxetine, the generic form of Eli Lillys Prozac, Zoloft from
Pfizer, Forest Laboratories Celexa and Lexapro, and Effexor from
Wyeth. The principal competitors in the USA for Wellbutrin are
generic forms of bupropion, the generic forms of SSRIs and Effexor
XR, a Wyeth product. Paxil CR and the once-daily Wellbutrin XL help
to retain a strong presence in the anti-depressant market, given the
availability of both generic paroxetine and bupropion in the USA.
Generic competition for Seroxat/Paxil has also commenced in the
UK and a number of other markets.

GSK markets Coreg in the USA where its major competitors are Toprol
XL and generic betablockers. Avodart competes directly with Mercks
Proscar within the BPH market. The Group has co-promotion rights
in the USA for Levitra, which faces competition from Pfizers Viagra
and Lilly/Icos Cialis.
22

continued
Consumer Healthcare products

GlaxoSmithKlines principal consumer healthcare products are in three
major areas. An analysis of sales by these areas is set out below:
OTC medicines
Oral care
Nutritional healthcare
2005
m
2004
m
2003
m
1,437
943
619
1,400
913
573
1,472
915
569
2,999
2,886
2,956
The leading products in this category are Lucozade glucose energy
and sports drinks, Ribena, a blackcurrant juice-based drink rich in
vitamin C, and Horlicks, a range of milk-based malted food and
chocolate drinks.
In 2005 sales were 2% higher in CER terms and 4% higher in sterling

terms than in 2004.
Consumer Healthcare competition

GSK holds leading global positions in all its key consumer product
areas. Worldwide it is the third largest in Oral care and in OTC
medicines. In Nutritional healthcare it holds the leading position in
the UK, India and Ireland.
Major products, which are not necessarily sold in all markets, are:
Category
Over-the-counter medicines
Analgesics
Dermatologicals
Gastro-intestinal
Respiratory tract
Smoking control
Natural wellness support

Oral care
Product
Panadol
Zovirax
Abreva
Tums
Citrucel
Contac
Beechams
Commit
Nicorette
NicoDerm CQ
NiQuitin CQ
Nicabate CQ
Abtei
The environment in which the Consumer Healthcare business

operates has become ever more challenging:
consumers are demanding better quality, better value and improved
performance
retailers have consolidated and globalised which has strengthened
their negotiation power
competitors are finding conditions equally challenging and
competing more aggressively across all elements of the marketing
mix
cycle times for innovation have been reduced.
The main competitors include the major international companies
Colgate-Palmolive, Johnson & Johnson, Pfizer, Procter & Gamble,
Unilever and Wyeth. In addition, there are many other companies
that compete with GSK in certain markets.
Aquafresh
Dr Best
Macleans
Odol
Odol Med 3
Polident
Poligrip
Sensodyne
The major competitor products in OTC medicines are:

in the USA: Metamucil (laxative), Pepcid (indigestion) and private
label smoking control products
in the UK: Lemsip (cold remedy), Nurofen and Anadin (analgesics),
and Nicorette and Nicotinell (smoking control treatments).
Lucozade
Ribena
Horlicks
In Oral care the major competitors are Colgate-Palmolives Colgate

and Procter & Gambles Crest.
Over-the-counter medicines
The leading products are Panadol, a widely available paracetamol/
acetominophen analgesic, Nicorette gum in the USA, the NicoDerm,
NiQuitin CQ and Nicabate range of smoking control products, Tums,
a calcium-based antacid, Citrucel laxative, Contac for the treatment
of colds, Abtei, a natural medicines and vitamin range, and Zovirax
and Abreva for the treatment of cold sores.
In Nutritional healthcare the major competitors to Horlicks are Ovaltine

and Milo malted food and chocolate drinks. The competitors to
Ribena are primarily local fruit juice products, while Lucozade
competes with other energy drinks.
23
Oral care
The leading Oral care products are toothpastes and mouthwashes
under the Aquafresh, Sensodyne, Macleans and Odol brand names,
and a range of toothbrushes sold under the Aquafresh and Dr Best
names. In addition, denture care products are available principally
under the Polident, Poligrip and Corega brand names.
Regulation Pharmaceuticals
Recent government healthcare reforms in countries such as France,

Spain and Germany may restrict pricing and reimbursement.
GSK operates within a highly regulated environment. Regional and

country-specific laws and regulations define the data required to show
safety and efficacy of pharmaceutical products, as well as govern
testing, approval, manufacturing, labelling and marketing of drugs.
These regulatory requirements are a major factor in determining
whether a marketable product may be successfully developed and
the amount of time and expense associated with this development.
In the USA, recent legislation on healthcare reform, cross-border

trade, the acceleration of generics to market and increased patient
contributions have further increased the focus on pricing. Currently,
there are no government price controls over private sector
purchases, but federal law requires pharmaceutical manufacturers
to pay prescribed rebates on certain drugs in order to be eligible for
reimbursement under Medicaid and other federal healthcare
programmes.
In Europe, pharmaceutical firms and regulators are managing a

transition following the implementation of new medicines legislation
at the end of 2005. Significant changes are being implemented in a
number of areas, including approval procedures, post marketing
requirements, manufacturing controls (on active ingredients and
excipients), labelling requirements, pharmacovigilance processes and
an increased emphasis in involvement and availability of information
for patients in the EU.
Medicare
In 2006, the US Medicare program, a federally funded healthcare
insurance program benefiting senior citizens and certain disabled
Americans, included coverage for prescription medicines. This is a
new benefit under the Medicare program and the most dramatic
change in the program since its inception in the 1960s. The coverage
is voluntary, includes brand-name and generic drugs and is open to
the 41 million Americans with Medicare coverage.
The climate of change will continue, with the expectation that a new
Paediatric Regulation will be finalised in 2006, stimulating industry
research into paediatric indications, via intellectual property incentives.
A number of competing private organisations provide the new benefit

with premiums subsidised by the government. Benefits must satisfy
a minimum standard outlined in federal law. While the law provides
incentives for manufacturers to negotiate prices with private plans, it
does not provide for government price controls. The government
provides additional help to more than 14 million people on Medicare
with limited incomes and resources. Those qualifying beneficiaries
pay no or reduced premiums and deductibles, and low copayments
for their prescriptions.
The European Medicines Agency (EMEA) has published the final

version of its Road Map, a strategic plan to 2010. This will be an
additional driver for change, covering areas such as new technologies,
innovative development approaches and enhanced provision of
agency advice during the development process.
In the USA, safety issues of prescription drugs are a primary focus of
the FDA and congressional oversight committees since the recent
withdrawal of several products from the market for safety reasons.
GSK is working closely with the FDA to assess any impact this will
have on any of its own current development programmes. As in
Europe, evaluation of benefit and risk continues to be an important
consideration for approval of a new drug by the FDA.
Value for money

It is increasingly necessary to demonstrate the value for money of
new products. In particular, the impact on drug budget expenditure
and the burden of the disease that will be treated must be apparent.
In some markets, this requirement to satisfy healthcare purchasers as
to value for money is becoming an additional hurdle for product
acceptance over and above the regulatory tests of safety, efficacy and
quality. This may delay bringing effective and improved medicines to
the market and reduce their effective patent protection time.
The FDA has introduced a new focus called the Critical Path Initiative.
This is intended to facilitate innovation in drug development, hopefully
allowing for more rapid development and approval of needed
medicines. This initiative will investigate the use of pharmacogenomics
and surrogate markers of efficacy, among other things, such as
manufacturing innovations, as tools for rapidly developing and
producing safe and effective drugs for unmet medical needs. The
pharmaceutical industry, including GSK, are collaborating with the
FDA and National Institutes of Health in a number of these areas,
including the use of biomarkers.
In many markets, especially in the USA and Europe, it is becoming

more difficult for even a significantly improved therapy to obtain a
premium price over existing medication. Value-based pricing may be
difficult to apply in such circumstances, although in the USA it is still
possible to price products to reflect their value. It is not possible to
predict whether, and to what extent, the Groups business will be
affected by future legislative and regulatory developments relating to
specific pharmaceutical products or their price.
A new health information source has been launched by the US

government that includes electronic labelling of all approved
prescription drugs, posted within one day of an FDA approval action,
for immediate access by physicians and patients. GSK is now providing
labelling to the FDA for all products in this new electronic format. New
regulations from the FDA will be implemented mid-2006 that will
completely change the format of prescribing information in the USA.
Regulation Consumer Healthcare

The consumer healthcare industry is subject to national regulation for
the testing, approval, manufacturing, labelling and marketing of
products. In many countries, high standards of technical appraisal
involve a lengthy approval process before a new product is launched.
GSK is well placed to manage effectively these changes in the external

regulatory environment.
National regulatory authorisation is also required to approve the switch

of products from prescription to OTC. The requirements include longterm experience of the quality, safety and efficacy of the product in a
wide patient population and data to confirm that the relevant
condition is both self-limiting and easily diagnosed by the consumer.
Price controls
In many countries the prices of pharmaceutical products are controlled
by law. Governments may also influence prices through their control
of national healthcare organisations, which may bear a large part of
the cost of supplying products to consumers.
24
continued
Intellectual property is a key business asset for GSK. The effective legal
protection of intellectual property is critical in ensuring a reasonable
return on investment in R&D. Intellectual property can be protected
by patents, trademarks, registered designs, copyrights and domain
name registrations. Patent and trademark rights are regarded as
particularly valuable.
In many cases generic manufacturers launch, or attempt to launch,
generic versions of patented drugs prior to normal patent expiry,
arguing that the relevant patents are invalid and/or are not
infringed by their product. Significant litigation concerning these
challenges is summarised in Note 41 to the ffinancial statements,
Legal proceedings.
Requip. The patent on ropinirole is not due to expire until 2007a (USA)
and 2008b (Europe). A patent relating to the use of ropinirole in
Parkinsons disease is not due to expire until 2008 (USA) and 2011b
(Europe). Litigation challenging the validity of these patents is ongoing
in the USAe.
Retrovir. There are no patents on zidovudine. Patents covering
pharmaceutical formulations containing zidovudine and their medical
use have expired in the USA and will expire in 2006 in Europe.
Patents
GSKs policy is to obtain patent protection on all significant products
discovered or developed through its R&D activities. Patent protection
for new active ingredients is available in all significant markets.
Protection can also be obtained for new pharmaceutical formulations
and manufacturing processes, and for new medical uses and special
devices for administering products.
Seretide/Advair. The patent on the specific combination of salmeterol

xinafoate and fluticasone propionate is not due to expire until 2010
(USA) and 2013b (Europe). An application for re-issue of the US patent
has been filed by GSKe with the US Patent and Trademark Office
(USPTO). In January 2006, the USPTO issued a final office action
rejecting this application. GSK will seek reconsideration of this
rejectione. The UK patent has been revoked by the UK courts. Patents
on the individual ingredients have expired in the UK. In the USA, the
patent on salmeterol xinafoate does not expire until 2008.
The patent position with respect to the active ingredients in significant

products is as follows:
Avandia and Avandamet. The patent on rosiglitazone is not due to
expire until 2012a,c (USA) and 2013b (Europe). Patents on the
commercial form of the active ingredient rosiglitazone maleate are not
due to expire until 2015 (USA) and 2014b (Europe). Litigation
challenging the validity of the patents protecting these products is
ongoing in the USAe.
Serevent. The patent on salmeterol xinafoate is not due to expire until

2008 in the USA. In Europe, the patent has expired, except France
(2008b) and Italy (2009b).
Trizivir. The patent on the method of treatment using a combination
of lamivudine, zidovudine and abacavir does not expire until 2016
(USA) and 2016 (Europe).
Avodart. The patent on dutasteride is not due to expire until 2015a

(USA) and 2017b (Europe).
Combivir. The patent on the specific combination of lamivudine and
zidovudine is not due to expire until 2012 (USA) and 2013b (Europe).
Valtrex. The patent on valaciclovir is not due to expire until 2009a

(USA) and 2009b (Europe). Litigation challenging the validity of the
patent protecting this product is ongoing in the USAe.
Coreg. GSK is the exclusive licensee under the US patent on carvedilol,

which is not due to expire until 2007a,c.
Wellbutrin SR, Wellbutrin XL and Zyban. The patent on the active

ingredient has expired. There is now generic competition for the
sustained release (SR) and instant release (IR) forms in the USA. In
Europe, regulatory data exclusively provides protection until 2009 in
some markets. In the USA, Wellbutrin XL is protected by formulation
patents that expire in 2018. Litigation relating to the validity and
infringement of these patents is ongoing in the USAe.
Epivir. The patent on lamivudine is not due to expire until 2010a,c

(USA) and 2011b (Europe).
Flixotide/Flovent and Flixonase/Flonase. The patents on fluticasone
propionate have expired in the EU and USA. Generic competition to
Flixonase exists in the EU and the FDA recently approved a generic
version of Flonase in the USAe.
Ziagen. The patent on abacavir is not due to expire until 2012a,c (USA)
and 2014b (Europe).
Imigran/Imitrex. The patent on sumatriptan is not due to expire until

2009c (USA) and generally 2006b (Europe, except 2008b (Italy)).
Litigation challenging the validity of the patent protecting this product
is ongoing in the USAe.
Zofran. The patent on ondansetron has expired in the USA and

Europe, (except France (2007b) and Italy (2010b)). A patent on use in
treating emesis expires in 2006. Litigation challenging the validity of
the emesis use patent is ongoing in the USAe.
Lamictal. The patent on lamotrigine is not due to expire until 2009a,c

(USA). Litigation challenging the validity of this patent in the USA has
been settlede. In Europe, the corresponding patent has expired and
generic competition exists.
a) Including patent term restoration under the Hatch-Waxman Act

b) Including extension of term by national or European supplementary protection
certificates
c) Including granted or pending extension of term for paediatric exclusivity
d) A registered trademark of Bayer AG
e) See Note 41 to financial statements Legal proceedings.
Levitrad. GSK has co-promotion rights under the US patent on

vardenafil which is not due to expire until 2018 in the USA.
Lexiva/Telzir. GSK is the exclusive licensee under the patent on
fosamprenavir, which is not due to expire until 2017 (USA) and 2019b
(Europe).
25
Paxil/Seroxat. The patent on the commercial form of paroxetine is not

due to expire until 2007c (USA) and 2006 (Europe). Litigation relating
to the validity and infringement of the patents protecting this product
is ongoing in the USAe. Generic competition has commenced in the
USA, Europe and certain other markets. Paxil CR is protected by a
formulation patent that is not due to expire until 2012. A generic
manufacturer has applied for FDA approval of a generic form of Paxil
CR asserting non-infringement of this patente.
continued
Trademarks
All of GSKs pharmaceutical products are protected by registered
trademarks in major markets. There may be local variations, for
example, in the USA the trademark Paxil is used instead of Seroxat
and Advair is used instead of Seretide.
EHS management
GSK takes a systematic approach to managing EHS risks and impacts.
A framework of information and programmes based on the global
EHS standards guides the management of key aspects, impacts and
risks throughout the organisation.
Trademark protection may generally be extended for as long as the

trademark is used by renewing it when necessary. GSKs trademarks
on pharmaceutical products are important for maintaining the brand
identity of the product upon expiration of the patent.
EHS audits
As part of its governance responsibility, GSK conducts EHS audits of
its sites, assessing performance against the EHS standards and
assigning quantitative performance scores. In 2005, when 36 sites
were audited, 70% of these achieved audit scores of 70% or better.
As part of the continuous improvement process, progress was
monitored on actions arising from issues raised on all audits.
The Consumer Healthcare trademarks are particularly important, as

the business is very brand orientated and many products do not have
patent protection.
As part of the commitment to corporate responsibility and the proactive management of the GSK manufacturing and supply base, 41
suppliers were also assessed, representing about 20% of priority
suppliers. This process evaluated the management of key EHS risks
and impacts, as well as human rights issues, based on the Groups
requirements for priority suppliers. Recommendations were made for
improvements where needed.

Environment, health and safety (EHS) is a key element of corporate
responsibility for the Group and has a high priority. Responsibility for
EHS is at the highest level. There is a corporate group reporting to
the General Counsel that has overall responsibility for providing
governance and leadership on EHS issues. The head of this group
makes regular reports to the Corporate Executive Team (CET) and the
Audit and Corporate Responsibility Committees of the Board of
Directors. Within the businesses, operations managers are
responsible for EHS and are supported by site-based EHS and
occupational health staff.
EHS targets
As part of the EHS plan, targets are set every five years and 2005 is
the end of the first five-year target period. Targets were set for 10
environmental measures and for one measure of occupational health
and safety.
EHS strategy and plan

GSK has a strategic planning process for EHS that looks forward 10
years but is reviewed every year. The plan is aligned with the GSK
business drivers and includes both management and performance
measures and targets. Progress has been made in all areas of the plan,
with particular success in incorporating EHS into the selection and
management of contract manufacturers and key suppliers, in
developing and maintaining an open and effective dialogue with
external stakeholders, in providing EHS data for decision making on
new products and processes and in ensuring safety and health
concerns are properly addressed at GSKs facilities to minimise risk
and avoid disruption of product supply. Some areas for additional
focus are driver safety, occupational chemical exposure, machine
guarding, pharmaceuticals in the environment from patient excretion,
energy conservation and the use of hazardous chemicals in
manufacturing.
Progress towards meeting these targets has been tracked every year.
Final data for 2005 showing the level of achievement of targets will
be published on the website www.gsk.com. Significant progress has
been made towards achieving eight of the 10 EHS targets with some
of the progress due to outsourcing some processes to contract
manufacturers. For hazardous waste disposed and the proportion of
waste recycled, the targets have not been achieved. The targets have
not been achieved because of products transferred to facilities without
appropriate recycling systems in place, other recycling systems that
were down for maintenance and new products coming into
manufacturing.
GSK selects its measures of performance improvement based on the
potential for adverse impact on people or the environment, business
continuity or business reputation. Most of the measures selected are
similar to those reported by other companies and are recommended
by the Global Reporting Initiative, a long-term, multi-stakeholder,
international undertaking to develop and disseminate globally
applicable sustainability reporting guidelines.
Strategic focus in 2005

The plan provides an area of special focus each year. In 2005, the
focus was on completing core programmes. These programmes are
essential to prevent injury or illness or harm to the environment and
to ensure the continuity of GSKs business. Some of them will be
common to all operating locations. Operations with different risks
may have different core needs and therefore different core
programmes. For a programme to be complete it must have a
management system in place, acceptable audit scores and acceptable
progress against the EHS targets.
Sustainability
In the work towards eventual sustainability, GSK is addressing
economic, environmental and social issues in research, manufacturing,
sales and distribution of its medicines. Sustainability starts with
healthcare solutions found by R&D and continues with sustainable
solutions in manufacturing and sales. R&D is considering improving
operational efficiency for new products. In the future, the EHS plan
for excellence proposes investigating the use of renewable resources
and the overall balance of its impact on society and the environment.
The Group seeks dialogue with external stakeholders and considers
their views when developing approaches to sustainable development.
More information on EHS programmes and performance may be
found on the website.
There is a need to operate and maintain the programmes, monitor

their performance and continually look for improvements. Progress in
this strategic focus area may be seen in the audit scores and progress
to targets.
26
This section discusses GlaxoSmithKlines management structures
and governance procedures.
It contains the companys reporting disclosures on corporate
governance required by the Combined Code on Corporate
Governance of the Financial Reporting Council (Combined Code),
including the required statement of compliance.
The Board
Corporate Executive Team
Governance and policy
Dialogue with shareholders
Annual General Meeting
Internal control framework
Committee reports
The Combined Code
US law and regulation
27
28
29
30
31
32
33
34
35
36
Further, the company reports on compliance with the US laws and

regulations that apply to it.
continued
The Board
Dr Ronaldo Schmitz (Aged 67)

Appointed on 23rd May 2000. Non-Executive Director. Dr Schmitz
was formerly a Non-Executive Director of Glaxo Wellcome plc. He is
a Non-Executive Director of Legal & General Group plc and a member
of the Board of Directors of Rohm and Haas Company and Cabot
Corporation.
Sir Christopher Gent (Aged 57)

Appointed on 1st June 2004. Chairman. Sir Christopher was the Chief
Executive Officer of Vodafone plc, until his retirement in July 2003. He
is a Non-Executive Director of Lehman Brothers Holdings Inc, a
member of the Financial Reporting Council, a Senior Adviser at Bain
& Co. and Chairman of the advisory board of Reform.
Dr Lucy Shapiro (Aged 65)

Appointed on 23rd May 2000. Non-Executive Director. Dr Shapiro
was formerly a Non-Executive Director of SmithKline Beecham plc. She
is Ludwig Professor of Cancer Research in the Department of
Developmental Biology and Director of the Beckman Center for
Molecular and Genetic Medicine at the Stanford University School of
Medicine and a Non-Executive Director of Anacor Pharmaceuticals,
Inc. She holds a PhD in molecular biology.
Dr Jean-Pierre Garnier (Aged 58)

Appointed on 23rd May 2000. Chief Executive Officer. Dr Garnier
was appointed an Executive Director of SmithKline Beecham plc in
1992, and became Chief Executive Officer in April 2000. He is a NonExecutive Director of United Technologies Corporation and a member
of the Board of Trustees of the Eisenhower Exchange Fellowships. He
holds a PhD in pharmacology from the University of Louis Pasteur in
France and an MBA from Stanford University in the USA.
Tom de Swaan (Aged 59)

Appointed on 1st January 2006. Non-Executive Director. Mr de Swaan
is a member of the Managing Board of ABN AMRO, of which he was
Chief Financial Officer until 31st December 2005. He will retire from
the Board of ABN AMRO on 1st May 2006. He is a Non-Executive
Director of the Financial Services Authority, a member of the Board
of the Institute of International Finance, Chairman of the Board of the
Netherlands Opera and a member of the Board of the Royal
Concertgebouw Orchestra.
Lawrence Culp (Aged 42)

Appointed on 1st July 2003. Non-Executive Director. Mr Culp is
President and Chief Executive Officer of Danaher Corporation. Prior
to joining Danaher, he held positions in Accenture, previously
Andersen Consulting.
Sir Crispin Davis (Aged 56)
Appointed on 1st July 2003. Non-Executive Director. Sir Crispin is
Chief Executive of Reed Elsevier PLC. Prior to that, he was Chief
Executive of Aegis Group plc, which he joined from Guinness plc,
where he was a member of the main board and Group Managing
Director of United Distillers. He spent his early career with Procter &
Gamble.
Sir Robert Wilson (Aged 62)

Appointed on 1st November 2003. Non-Executive Director. Sir Robert
is Non-Executive Chairman of BG Group plc and the Economist Group
and was previously Executive Chairman of Rio Tinto.
Dr Tachi Yamada (Aged 60)
Appointed on 1st January 2004. Retiring on 1st June 2006. Chairman,
Research & Development. Dr Yamada was a Non-Executive Director,
and subsequently an Executive Director, of SmithKline Beecham plc.
Prior to joining SmithKline Beecham, he was Chairman of the
Department of Internal Medicine at the University of Michigan Medical
School and Physician-in-Chief of the University of Michigan Medical
Center. He is a Trustee of the Rockefeller Brothers Fund and a member
of the Advisory Board of Quaker BioVentures, Inc.
Julian Heslop (Aged 52)

Appointed on 1st April 2005. Chief Financial Officer. Mr Heslop joined
Glaxo Wellcome as Financial Controller in April 1998. In January 2001,
following the merger, he was appointed Senior Vice President,
Operations Controller. Prior to joining Glaxo Wellcome, he held senior
finance roles at Grand Metropolitan PLC.
Sir Deryck Maughan (Aged 58)
Appointed on 1st June 2004. Non-Executive Director. Sir Deryck is a
Managing Director of Kohlberg Kravis Roberts & Co. He was formerly
Chairman and CEO of Citigroup International and of Salomon
Brothers Inc. He is a Non-Executive Director of Reuters Group plc, as
well as serving on the Boards of Directors of Carnegie Hall, Lincoln
Center and NYU Medical Center. He is also an International Advisory
Board member of British American Business Inc. and a Board member
of the Trilateral Commission. He served as Vice Chairman of the New
York Stock Exchange from 1996 to 2000.
Moncef Slaoui (Aged 46)

Chairman Designate, Research & Development. Dr Slaoui, Senior Vice
President, Worldwide Business Development, has been appointed to
the Board with effect from 17th May 2006, and will succeed Dr
Yamada as Chairman, Research & Development on 1st June 2006. Dr
Slaoui joined GSK Biologicals in 1988 where he engineered the
development of a robust vaccines pipeline. He has a PhD in Molecular
Biology and Immunology from Universit Libre de Bruxelles.
Sir Ian Prosser (Aged 62)

Appointed on 23rd May 2000. Senior Independent Director. Sir Ian
was formerly a Non-Executive Director of SmithKline Beecham plc. He
was Chairman and Chief Executive of Bass plc and ultimately
Chairman of the demerged InterContinental Hotels Group plc. He
was Chairman of the World Travel and Tourism Council and the
London Stock Exchange Listed Advisory Council. He is Non-Executive
Deputy Chairman of BP plc, a Non-Executive Director of Sara Lee
Corporation and a member of the CBI Presidents Committee.
Other Directors
Mr John Coombe, formerly Chief Financial Officer, retired from the
Board on 31st March 2005.
Details of membership of the Board Committees may be found on
page 31.
28
continued
Corporate Executive Team (CET)

JP Garnier
Chief Executive Officer
As Chief Executive Officer, Dr Garnier is responsible for the
management of the Group. He oversees all operational aspects of
the Group, including establishing policies, objectives and initiatives,
and he directs long-term strategy. He was formerly Chief Executive
Officer of SmithKline Beecham, having joined the Group in 1990.
David Stout
President, Pharmaceutical Operations
Mr Stout is responsible for all pharmaceuticals and vaccines operations
worldwide, including the USA, Europe, International, Japan and
Global Manufacturing and Supply. He joined SmithKline Beecham in
1996 and was President, US Pharmaceuticals, until his current
appointment in January 2003.
Rupert Bondy
Senior Vice President and General Counsel
Mr Bondy is responsible for legal matters across the Group, together
with environmental, health and safety issues, insurance and security.
He was a lawyer in private practice before joining SmithKline Beecham
in 1995.
Chris Viehbacher
President, US Pharmaceuticals
Mr Viehbacher is responsible for US Pharmaceuticals. He joined
Wellcome in 1988 and was responsible for GSKs European
Pharmaceuticals business before his current appointment in 2003.
Ford Calhoun
Chief Information Officer
Dr Calhoun is responsible for information technology, a global
function that enables key business processes across all parts of the
Group. With doctoral and post-doctoral training in microbiology,
genetics, biomathematics and computer science, he joined Smith
Kline & French in 1984.
Andrew Witty
President, Pharmaceuticals Europe
Mr Witty is responsible for the Groups pharmaceuticals operations in
Europe. He joined Glaxo in 1985 and was Senior Vice President, Asia
Pacific until his current appointment in 2003.
John Clarke
President, Consumer Healthcare
Mr Clarke succeeded Mr Ziegler as President, Consumer Healthcare
on 31st January 2006. He joined Beecham in 1976 and progressed
through roles in Australasia, South Africa, The Far East, Japan, Canada
and the UK. From 1998 to 2003, John was President, Consumer
Healthcare Europe, and in 2004, appointed President, Futures Group.
Tachi Yamada
Chairman, Research & Development
Dr Yamada leads the Groups complex business of drug discovery and
development, creating new medicines through research. He joined
SmithKline Beecham in 1994 as a Non-Executive Director and became
Chairman, R&D Pharmaceuticals in 1999.
Marc Dunoyer
President, Pharmaceuticals Japan
Mr Dunoyer was appointed President, Pharmaceuticals Japan in March
2003. He joined the Group in 1999 and was Senior Vice President and
Regional Director, Japan until his current appointment.
Jennie Younger
Senior Vice President, Corporate Communications &
Community Partnerships
Mrs Younger is responsible for the Groups internal and external
communications, its image and partnerships with global communities.
She joined Glaxo Wellcome in 1996 as Director of Investor Relations
and was appointed to her current position in 2001.
Russell Greig
President, Pharmaceuticals International
Dr Greig leads the pharmaceutical operations outside the USA, Japan
and most of Europe, covering more than 100 countries. He joined the
Group in 1980 and was Senior Vice President, Worldwide Business
Development for R&D prior to his current appointment in March
2003.
Moncef Slaoui
Chairman Designate, Research & Development
Dr Slaoui will succeed Dr Yamada as Chairman, Research &
Development on 1st June. He will join the CET on 17th May. He joined
the Group in 1988 and is currently Senior Vice President, Worldwide
Business Development.
Julian Heslop
Chief Financial Officer
Mr Heslop became Chief Financial Officer on 1st April 2005. As head
of the finance function Mr Heslop is responsible for activities such as
financial reporting and control, tax and treasury, investor relations,
finance systems, internal audit and real estate. He joined Glaxo
Wellcome as Financial Controller in April 1998.
Other members
Mr Coombe retired as Chief Financial Officer on 31st March 2005.
Mr Ziegler retired as head of the Consumer Healthcare business on
31st January 2006.
Mr Ingram continues to work part-time as Vice Chairman of
Pharmaceuticals, acting as a special advisor to the Group and
attending CET meetings in that capacity.
Dan Phelan
Senior Vice President, Human Resources
Mr Phelan is responsible for benefits, compensation, recruitment,
organisation development, leadership development and succession
planning, human resource information systems and employee health
management. He was a lawyer in private practice before joining Smith
Kline & French in 1981.
29
David Pulman
President, Global Manufacturing and Supply
Dr Pulman is responsible for the Global Manufacturing and Supply
Organisation and Global Procurement. He joined Glaxo in 1978 and was
responsible for the North American supply network, manufacturing
strategy and logistics until his current appointment in 2002.
continued
The Board appraises and approves major financing, investment and

contractual decisions in excess of defined thresholds. In addition, the
Board evaluates and monitors the performance of the Group as a
whole. This includes:
The Board and Corporate Executive Team

The Directors are listed under The Board (page 28).
The Board is responsible for the Groups system of corporate

governance and is ultimately accountable for the Groups activities,
strategy and financial performance.
engaging at Board meetings with the CEO, the other Executive

Directors and members of the CET as appropriate, on the financial
and operating performance of GSK and external issues material to
the Groups prospects
The Chief Executive Officer (CEO) is responsible for executive

management of the Group and is assisted by the CET. The CET meets
11 times per year and otherwise as necessary. The members and their
responsibilities are listed under Corporate Executive Team (page
29).
evaluating progress toward the achievement of the Groups financial

and business objectives and annual plans
monitoring, through reports received directly or from various
committees, the significant risks facing the Group.
The Board comprises three Executive and nine Non-Executive

Directors. Whilst the Board considers all its Non-Executive Directors to
be independent in character and judgement, it has determined that
one Non-Executive Director, Dr Shapiro, should not be considered as
independent under the Combined Code. Dr Shapiro is not
considered to be independent due to the remuneration that she
receives from the Group as a member of the GlaxoSmithKline
Scientific Advisory Board. When Sir Christopher Gent was appointed
to the Board as Deputy Chairman, he was determined by the Board
to be independent. Upon taking up the chairmanship of the Board
on 1st January 2005, in accordance with the Combined Code, he
was excluded from the determination of whether at least half the
Board are independent Non-Executive Directors. Neither Dr Shapiro
nor Sir Christopher Gent hold positions on a Board Committee where
independence is required under the Combined Code.
The Board has overall responsibility for succession planning for the
CEO and the other Executive Directors. The Board has given the CEO
broad authority to operate the business of the Group, and the CEO
is accountable for, and reports to the Board on, business performance.
CET members make regular presentations to the Board on their areas
of responsibility, and the Board meets with all the CET members on
an annual basis to discuss collectively the Groups strategy. A primary
element of the induction process for new Non-Executive Directors is
undertaken by members of the CET, and all Non-Executive Directors
are encouraged to have separate informal discussions at their
discretion with any CET members.
The Board met six times in 2005, with each member attending as
follows:
The Board considers that Mr Culp, Sir Crispin Davis, Sir Deryck
Maughan, Sir Ian Prosser, Dr Schmitz, Mr de Swaan and Sir Robert
Wilson are independent in accordance with the recommendations of
the Combined Code.
Name

Dr JP Garnier
Mr J Heslop
Dr T Yamada
Mr L Culp
Sir Crispin Davis
Sir Deryck Maughan
Sir Ian Prosser
Dr R Schmitz
Dr L Shapiro
Sir Robert Wilson
Mr J Coombe
At the date of publication and throughout 2005, a majority of the

Board members, excluding the Chairman, were independent NonExecutive Directors.
Sir Christopher Gent succeeded Sir Christopher Hogg on 1st January
2005 and was Chairman throughout 2005. Dr Garnier is CEO. The
Chairman leads the Board, and represents the Board to the CEO and
other CET members as necessary between Board meetings. The CEO
manages the Group and implements the strategy and policies
adopted by the Board. The Chairman and the chairmen of Board
Committees communicate regularly with the CEO and other CET
members. The division of responsibilities between the role of
Chairman and the CEO has been set out in writing, agreed by the
Board and appears in full on the website.
Number of meetings
held whilst a Board member
Number of
meetings attended
6
6
5
6
6
6
6
6
6
6
6
1
6
6
5
6
5
6
6
6
6
6
6
1
In addition to the six scheduled meetings, the Board also met on a

quorate basis on two occasions.
Business environment development

To ensure that the Board is kept up-to-date on important matters,
including legal, governance and regulatory developments,
presentations are made on a regular basis by both external and
internal advisers.
Sir Ian Prosser was Senior Independent Director (SID) throughout

2005.
Board process
The Board has the authority, and is accountable to shareholders, for
ensuring that the company is appropriately managed and achieves the
strategic objectives it sets. The Board discharges those responsibilities
through an annual programme of meetings which includes the
approval of overall budgetary planning and business strategy. The
Board reviews the companys internal controls and risk management
policies and approves its governance structure and code of ethics.
Independent advice
The Board recognises that there may be occasions when one or more
of the Directors feel it is necessary to take independent legal and/or
financial advice at the companys expense. There is an agreed
procedure to enable them to do so. This is explained in the Corporate
Governance section of the companys website.
30
continued
Indemnification of Directors
Qualifying third party indemnity provisions (as defined in section
309B(1) of the Companies Act 1985) are in force for the benefit of
the Directors and former Directors who held office during 2005.
Company Secretary
The Company Secretary is responsible to the Board and is available to
individual Directors in respect of Board procedures. The Company
Secretary is Simon Bicknell, who was appointed in May 2000. He is a
barrister and joined the Group in 1984. He is secretary to all the Board
Committees.
Corporate Responsibility Committee

The Corporate Responsibility Committee consists entirely of NonExecutive Directors and provides a Board-level forum for the regular
review of external issues that have the potential for serious impact
upon the Groups business and for the oversight of reputation
management. The Committee is also responsible for governance
oversight of the Groups worldwide donations and community
support. The Committee meets formally three times a year and
otherwise as necessary.
Board Committees
The Board has established a number of Committees and provides
sufficient resources to enable them to undertake their duties. Executive
Directors are not members of the Audit, Remuneration, Nominations
or Corporate Responsibility Committees, although they may be invited
to attend meetings. Each Director is a member of the Corporate
Administration & Transactions and Financial Results Committees.
Membership of these Committees is shown in the table below.

Mr L Culp
Sir Crispin Davis
Sir Deryck Maughan
Sir Ian Prosser
Dr R Schmitz*
Dr L Shapiro
Mr de Swaan*
Sir Robert Wilson
Audit
Remuneration
Nominations
Corporate
Responsibility
M
M
C
M
M
M
M
M
M
Financial Results Committee

The Financial Results Committee reviews and approves, on behalf of
the Board, the Annual Report and Form 20-F, the Annual Review and
the convening of the Annual General Meeting, together with the
preliminary and quarterly statements of trading results. Each Director
is a member of the Committee and the quorum for a meeting is any
three members. To be quorate, each meeting must include the
Chairman or the Chairman of the Audit Committee and the CEO or
the Chief Financial Officer (CFO). The Committee meets as necessary.
*Mr de Swaan will succeed Dr Schmitz as Chairman of the Audit Committee from
September 2006.
Key: C = Chairman. M = Member.
The following is a summary of the role and terms of reference of each

Committee. The current full terms of reference of each Committee
may be obtained from the Company Secretary or the Corporate
Governance section of the companys website.
Corporate Administration & Transactions Committee

The Corporate Administration & Transactions Committee reviews and
approves matters in connection with the administration of the Groups
business, and certain corporate transactions. The Committee consists
of the Directors, CET members and the Company Secretary. The
Committee meets as necessary.
Evaluation of the Board, Board Committees and Directors
The performance evaluation of the Board, its Committees and
Directors during 2005 was undertaken by the Chairman and
implemented in collaboration with the Committee Chairmen, with the
support of the Company Secretary. The Board considered the review
conclusions at its meeting in December 2005 and agreed a number
of minor improvements to its procedures and operating methodology.
Audit Committee
The Audit Committee reviews the financial and internal reporting
process, the system of internal controls, the management of risks and
the external and internal audit process. The Committee also proposes
to shareholders the appointment of the external auditors and is
directly responsible for their remuneration and oversight of their work.
The Committee consists entirely of independent Non-Executive
Directors. It meets at least four times a year and otherwise as
necessary. The Audit Committee Report is on pages 34 and 35.
The Senior Independent Non-Executive Director, Sir Ian Prosser,

undertook the performance evaluation of the Chairman through
a discussion with the Directors, excluding the Chairman, in
December 2005.
Remuneration Committee
The Remuneration Committee determines the terms of service and

remuneration of the Executive Directors and members of the CET and,
with the assistance of external independent advisors, it evaluates and
makes recommendations to the Board on overall executive
remuneration policy. The Committee consists entirely of independent
Non-Executive Directors. It meets at least four times a year and otherwise
as necessary. Information on the remuneration of Directors is given in
the Remuneration Report on pages 37 to 54. The Chairman of the
company and the CEO are responsible for evaluating and making
recommendations to the Board on the remuneration of the NonExecutive Directors.
Financial results are announced quarterly.

The company reports formally to shareholders twice a year, when its
half-year and full-year results are announced. The full-year results are
included in the companys Annual Report and Annual Review, which
are issued to shareholders. The companys half-year results are
published in a national newspaper shortly after release. The CEO and
CFO give presentations on the full-year results to institutional investors,
analysts and the media.
31
Nominations Committee
The Nominations Committee reviews the structure, size and
composition of the Board and the appointment of members of the
Board and the CET, and makes recommendations to the Board as
appropriate. The Committee also monitors the planning of succession
to the Board and Senior Management. The Committee consists
entirely of Non-Executive Directors, of whom a majority are
independent, and meets at least once a year and otherwise as
necessary. The Nominations Committee Report is given on page 35.
continued
Donations to Political Organisations and EU Political

Expenditure
At the AGM in May 2001, shareholders first authorised the company
to make donations to EU Political Organisations and to incur EU
Political Expenditure, under the provisions of the Political Parties,
Elections and Referendums Act 2000, of up to 100,000 each year.
This authority has since been renewed annually. Although the
company does not make and does not intend to make such payments
or donations to political parties, within the normal meaning of that
expression, the definition in the legislation of EU Political
Organisation is wide. It may extend to bodies, which the company
and its subsidiaries might wish to support including those concerned
with policy review, law reform, the representation of the business
community and special interest groups, such as those concerned with
the environment. No donations were made to EU Political
Organisations during 2005. The Group made donations to non-EU
Political Organisations totalling 320,000 during 2005 (291,000 in
2004).
There are webcast teleconferences after the release of the first, second
and third quarter results for institutional investors, analysts and the
media. The Annual Report, Annual Review and quarterly results are
available on the companys website.
The Annual General Meeting (AGM) takes place in London, and
formal notification is sent to shareholders at least one month in
advance. At the Meeting, a business presentation is made to
shareholders and all Directors able to attend are available, formally
during the AGM, and informally afterwards, for questions. Committee
Chairmen ordinarily attend the AGM to respond to shareholders
questions. Mr Culp was unable to attend the companys AGM in May
2005 due to other commitments. All resolutions at the AGM are
decided on a poll as required by the companys Articles of Association.
The results of the poll are announced to the London Stock Exchange
and posted on the companys website. Details of the 2006 AGM are
set out in the section Annual General Meeting (see this page).
To ensure that the Non-Executive Directors are aware of and
understand the views of major shareholders about the company, the
Board has in place a process focusing on sector-specific issues, as well
as general shareholder preferences. At its meeting in July, the Board
received an external review of shareholder opinion.
Donations of 301,000 were made in the USA and 19,000 in

Canada. The USA is the largest recipient of political donations, and
this reflects the US political system, where candidates are sponsored
solely by donations from individuals, NGOs, companies and other
parties.
The CEO and CFO maintain a dialogue with institutional shareholders

on performance, plans and objectives through a programme of
regular meetings.
In line with US law, the corporate donations by GSK are not made at
a federal level, but only to candidates and political parties at the state
and local levels. Donations are accepted practice in the USA, and as
a major employer in a heavily regulated industry, it is important for
GSK to engage fully in the political process. Donations are one of the
ways of doing this. GSK supports those candidates who seek an
environment that appropriately rewards high-risk, high-investment
industries and who believe in free market principles and intellectual
property rights.
The Groups Investor Relations department, with offices in London

and Philadelphia, acts as a focal point for contact with investors
throughout the year.
The Chairman meets regularly with institutional investors to hear their
views and discuss issues of mutual importance.
The Chairman of the Remuneration Committee meets with major
shareholders to discuss executive remuneration policy. All NonExecutive Directors, including new appointees, are available to meet
with major shareholders if requested.
The situation is similar in Canada, and donations follow the same

guidelines. In the rest of the world donations are very rare and of
low value.
The companys website gives access to current financial and business

information about the Group.
There is also a GSK Political Action Committee (PAC) in the USA which
gives political donations. PACs are employee organisations which
allow employees to contribute to a fund for political donations.
Employees decide upon the recipients of the PAC donations. In 2005,
a total of 282,000 was donated to political organisations by the GSK
PAC.
Share buy-back programme

A total of 6.5 billion has been spent by the company on buying its
own shares for cancellation or to be held as Treasury shares, of which
1 billion was spent in 2005. The programme covers purchases by the
company of shares for cancellation or to be held as Treasury shares,
in accordance with the authority given by shareholders at the
companys AGM in 2005.

The AGM will be held at 2.30pm on Wednesday, 17th May 2006 at
The Queen Elizabeth II Conference Centre, Broad Sanctuary,
Westminster, London SW1P 3EE. The business to be transacted at the
meeting will include:
In May 2005, the company was authorised to purchase a maximum

of 586.4 million shares. During 2005, 72.8 million shares, representing
1.2% of the issued share capital, were purchased and held as Treasury
shares (see Note 31 to the fi
f nancial statements, Share capital and
share premium account).
Receiving and adopting GlaxoSmithKline's 2005 Annual

Report
The exact amount and timing of future purchases, and the extent to
which repurchased shares will be held as Treasury shares rather than
being cancelled, will be determined by the company and is dependent
on market conditions and other factors.
Approving the 2005 Remuneration Report

The Remuneration Report on pages 37 to 54 sets out the
remuneration policies operated by GlaxoSmithKline and disclosures
on Directors remuneration, including those required by the
Companies Act 1985 and the Directors Remuneration Report
Regulations 2002. A resolution will be proposed to approve the
Remuneration Report.
32
continued
The internal control framework also relies on the following for

overseeing and reporting risk and compliance issues.
Retirement, election and re-election of Directors

Dr Slaoui and Mr de Swaan have been appointed Directors since the
2005 AGM and will offer themselves for election to the Board. Mr
Culp, Sir Crispin Davis and Dr Schmitz will retire and offer themselves
for re-election to the Board under article 93 of the companys Articles
of Association. Dr Shapiro will retire at the conclusion of the AGM
and will not offer herself for re-election.
Re-appointment and remuneration of Auditors
Resolutions will be proposed to re-appoint PricewaterhouseCoopers
LLP as auditors and to authorise the Audit Committee to determine
their remuneration.
The ROCC meets on a regular basis to review and assess significant

risks and their mitigation plans. The ROCC, responding to the Group
policy referred to above, has provided the business units with a
framework for risk management and upward reporting of significant
risks. Mitigation planning and identification of a manager with overall
responsibility for management of any given risk is a requirement.
Special business
The company will seek authority to:
make donations to EU Political Organisations and incur EU Political
Expenditure
Risk Management and Compliance Boards (RMCBs)

Risk Management and Compliance Boards (RMCBs) have been
established in each of the major business units. Membership often
comprises members of the senior executive team of the respective
business unit, augmented by specialists where appropriate. The RMCBs
oversee management of all risks that are considered important for their
respective business units, including those risks that are designated as
significant to GlaxoSmithKline as a whole, thus increasing the number
of risks that are actively managed across the Group.
allot Ordinary Shares in the company

give the Directors authority to disapply pre-emption rights when
allotting new Shares in connection with rights issues or otherwise
up to a maximum of 5% of the current issued share capital and
purchase its own Ordinary Shares up to a maximum of just under
10% of the current issued share capital.
Each RMCB regularly reports the status regarding its significant risks
to the ROCC.
The Board recognises its responsibility to present a balanced and

understandable assessment of the Groups position and prospects.
The structure of accountability and audit operated in GSK is as follows.
Compliance functions
In a number of risk areas, specific standards that meet or exceed
requirements of applicable law have been established. Specialist audit
and compliance functions (for example Corporate Environment,
Health & Safety, Global Quality Assurance and Worldwide Regulatory
Compliance) assist in the dissemination, implementation and audit
of these standards.
The Board has accountability for reviewing and approving the adequacy
and effectiveness of internal controls operated by the Group, including
financial, operational and compliance controls and risk management.
The Board has delegated responsibility for such review to the Audit
Committee, which receives reports from those individuals identified in
the Committees Report on pages 34 and 35. It is the responsibility of
management, through the CET, to implement Board policies on risk
and control. The CET is responsible for identifying, approving,
monitoring and enforcing key policies that go to the heart of how the
Group conducts business. The internal control framework includes
central direction, resource allocation and risk management of the key
activities of research and development, manufacturing, marketing and
sales, legal, human resources, information systems and financial
practice. As part of this framework, there is a comprehensive planning
system with an annual budget approved by the Board. The results of
operating units are reported monthly and compared to the budget.
Forecasts are prepared regularly during the year.
Corporate Ethics & Compliance (CEC)

The ROCC is also supported by the Corporate Ethics & Compliance
department which is responsible for supporting the development and
implementation of practices that facilitate employees compliance
with laws and Group policy.
The thrust of the Groups compliance effort is due diligence in
preventing and detecting misconduct and non-compliance with law
or regulation by promoting ethical behaviour, compliance with all laws
and regulations, corporate responsibility at all levels and effective
compliance systems.
The CEC is managed by the Corporate Compliance Officer, who
reports directly to the CEO. The Corporate Compliance Officer chairs
the ROCC and provides summary reports on the ROCCs activities and
the Groups significant risks to the CET and the Audit Committee on
a regular basis. The Corporate Compliance Officers direct reporting
line to the Audit Committee provides a mechanism for bypassing the
executive management should the need ever arise.
Extensive financial controls, procedures, self-assessment exercises and

risk activities are reviewed by the Groups internal auditors. Commercial
and financial responsibility, however, is clearly delegated to local
business units, supported by a regional management structure. These
principles are designed to provide an environment of central leadership
coupled with local operating autonomy as the framework for the
exercise of accountability and control within the Group.
Areas of potentially significant risk

For details of risks affecting the Group, see Note 41 to the fi
f nancial
statements, Legal proceedings and Risk factors on pages 71 to 74.
The Group also attaches importance to clear principles and procedures

designed to achieve appropriate accountability and control. A Group
policy, Risk Management and Legal Compliance, mandates that
business units establish processes for managing and monitoring risks
significant to their businesses and the Group.
33
Risk Oversight and Compliance Council (ROCC)

The ROCC is a council of senior executives authorised by the Board
to assist the Audit Committee oversee the risk management and
internal control activities of the Group. Membership comprises several
CET members and some of the heads of departments with internal
control, risk management, audit and compliance responsibilities.
continued
Accordingly, the Board chose not to nominate any one committee

member as having recent and relevant financial experience as defined
by the Combined Code, or as an Audit Committee Financial Expert
as defined by Sarbanes-Oxley.
Effectiveness of controls
The internal control framework has been in operation for the whole
of the year under review and continues to operate up to the date of
approval of this report. The system of internal controls is designed to
manage rather than eliminate the risk of not achieving business
objectives, and can only provide reasonable and not absolute
assurance against material misstatement or loss.
In arriving at its conclusion, the Board considered the following points.

Dr Schmitz has been the Chairman of the Committee since April
2001. Prior to his appointment as a Non-Executive Director of the
company, he was a Non-Executive Director of Glaxo Wellcome plc,
where he served on the Audit Committee. Dr Schmitz has also been
a member of the Executive Board of Directors of Deutsche Bank AG.
He retired from that Board in 2000 having been in charge of
investment banking. Dr Schmitz was formerly a member of the
Executive Board of Directors of BASF from 1980 to 1990, including
CFO from 1985 to 1990. He holds an MBA from Insead. Sir Ian Prosser
was CFO and later CEO of Bass PLC and is a member of the Institute
of Chartered Accountants in England and Wales. Sir Robert Wilson
began his professional career as an economist. He is Chairman of BG
Group plc. He held senior management positions at Rio Tinto plc
culminating in his appointment as Executive Chairman, from which
he retired in 2003.
The Audit Committee receives reports on areas of significant risk to

the Group and on related internal controls. Following consideration
of these reports, the Audit Committee reports annually to the Board
on the effectiveness of controls. Such controls may mitigate but
cannot eliminate risks. In addition, there are areas of the Groups
business where it is necessary to take risks to achieve a satisfactory
return for shareholders, such as investment in R&D and in acquiring
new products or businesses. In these cases, it is the Groups objective
to apply its expertise in the prudent management rather than
elimination of risk. The Directors review relates to the company and
its subsidiaries and does not extend to material associated
undertakings, joint ventures or other investments.
The Board, through the Audit Committee, has reviewed the
assessment of risks and the internal control framework that operates
in GlaxoSmithKline and has considered the effectiveness of the system
of internal control in operation in the Group for the year covered by
this report and up to the date of its approval by the Board. The process
followed by the Board in reviewing the system of internal controls
accords with the guidance on internal control issued by the Turnbull
Committee in 1999.
Sir Deryck Maughan was appointed a member of the Committee on

21st January 2005. He is Managing Director of Kohlberg Kravis
Roberts & Co (KKR) and Chairman of KKR Asia. He was Chairman and
CEO of Citigroup International and Vice Chairman of Citigroup Inc.
Prior to the creation of Citigroup, he was Chairman and Co-Chief
Executive Officer of Salomon Smith Barney. He was also Chairman and
Chief Executive Officer of Salomon Brothers.
When appointing Mr de Swaan to the Committee with effect from
1st January 2006, the Board determined that he had recent and
relevant financial experience in accordance with the Combined Code.
In coming to this conclusion, the Board paid particular attention to Mr
de Swaans role as Chief Financial Officer of ABN AMRO, from which
he retired on 31st December 2005. The Board also considers Mr de
Swaan to be an Audit Committee Financial Expert as defined by
Sarbanes-Oxley.
Committee reports
Audit Committee Report
The Audit Committees role flows directly from the Boards oversight
function and it is authorised by the Board to investigate any activity
within its terms of reference. The Committee has written terms of
reference which have been approved by the Board. The Committee
reports regularly to the Board on the performance of the activities it
has been assigned. The Committees main responsibilities include
reviewing the corporate accounting and financial reporting process,
monitoring the integrity of the financial statements, evaluating the
system of internal control and the management of risks, overseeing
activities of each of the Groups compliance audit functions and
overseeing compliance with laws, regulations and ethical codes of
practice. The Committees oversight role requires it to address regularly
the relationships between management and the internal and external
auditors, and understand and monitor the reporting relationships and
tiers of accountability between them. The Committee receives regular
reports from members of the CET and senior managers covering the
key compliance activities of the Group, including those concerning
R&D, manufacturing, sales and marketing and EHS.
The Committee is supported by the Company Secretary, who attends

the Committees meetings, and it has available to it financial resources
to take independent professional advice when considered necessary.
Meetings of the Committee are attended by the Chairman, CEO,
CFO, General Counsel, Head of Global Internal Audit (GIA), Corporate
Compliance Officer and the external auditors.
In 2005, the Committee worked to a structured programme of
activities, with standing items that the Committee is required to
consider at each meeting together with other matters focused to
coincide with key events of the annual financial reporting cycle:
the external auditors reported to the Committee on all critical
accounting policies and practices used by the company, alternative
accounting treatments which had been discussed with
management and the resultant conclusion by the external auditors,
material written communications with management and any
restrictions on access to information
Committee members bring considerable financial and accounting

experience to the Committees work. Members have past employment experience in either finance or accounting roles or comparable
experience in corporate activities.
the CFO reported on the financial performance of the company

and on technical financial and accounting matters
In respect of 2005, the Board had determined that the combined

qualifications and experience of the Committee members, when
taken together with its modus operandi, gave the Committee
collectively the financial expertise necessary to discharge its
responsibilities.
the General Counsel reported on material litigation

the Company Secretary reported on corporate governance
34
continued
the Corporate Compliance Officer reported on the activities

undertaken by the ROCC
the Company Secretary, as Chairman of the Disclosure Committee,
reported on matters that affected the quality and timely disclosure
of financial and other material information to the Board, to the
public markets and to shareholders. This enabled the Committee to
review the clarity and completeness of the disclosures in the
published annual financial statements, interim reports, quarterly
and preliminary results announcements and other formal
announcements relating to financial performance prior to their
release by the Board.
In addition, the Committee recommended to the Board that Dr Schmitz

should serve a further term of three years as a Non-Executive Director
and that he should remain Chairman of the Audit Committee until
September 2006. The Committee also made a recommendation to
the Board that Dr Ralph Horwitz be appointed a Non-Executive
Director. Following the announcement of Dr Horwitzs appointment,
a potential conflict of interest was disclosed, and Dr Horwitz decided
not to take up his appointment as a Non-Executive Director of the
company.
The Audit Committee, management, internal auditors and the full

Board work together to ensure the quality of the companys corporate
accounting and financial reporting. The Committee serves as the
primary link between the Board and the external and internal auditors.
This facilitates the necessary independence from management and
encourages the external and internal auditors to communicate freely
and regularly with the Committee. In 2005, the Committee met both
collectively and separately with the external auditors and the Head of
GIA, without members of management being present.
When recruiting Non-Executive Directors, the Committee considers the

particular skills, knowledge and experience that would benefit the Board
most significantly for each appointment. Broad selection criteria are
used which focus on achieving a balance between the representation
of European, UK and US markets, and having individuals with CEO
experience and skills developed in various sectors and specialities. During
2005, particular focus was placed upon recruiting a new Non-Executive
Director with recent and relevant financial expertise, to join the Audit
Committee. Professional search agencies are engaged specialising in
the recruitment of high calibre Non-Executive Directors. Dossiers of
potential non-executive appointees are provided to the Committee and
candidates are short-listed for interview after considering their relevant
qualifications.
The Committee has primary responsibility for making a

recommendation to shareholders on the appointment, reappointment
and removal of the external auditors by annually assessing the
qualifications, expertise, resources and independence of the external
auditors and the effectiveness of the audit process.
A customised induction process is conducted for each of the new

Non-Executive Directors focusing on their particular experience and
taking account of their different backgrounds. This process includes
meeting members of the CET and other senior executives and visiting
particular operational facilities of the Group.
In making its assessment, the Committee considers papers which

detail the relevant regulatory requirements relating to external auditors
and evaluates reports from the external auditors on their compliance
with the requirements. Where the external auditors provide non-audit
services, the Committee ensures that auditor objectivity and
independence are safeguarded by a policy requiring pre-approval by
the Audit Committee for such services. Expenditure on audit and nonaudit services is set out on pages 95 and 96.
The Committee continued to keep under review the succession

planning for senior executive positions, including that of the CEO and
Chairman, Research & Development.
When appointing new Executive Directors, the Committee considers
the skills, knowledge and experience required for the particular
executive position. The Committee will consider potential external and
internal candidates before recommending to the Board to approve the
new appointment. All new Directors offer themselves for election at
the companys next AGM. Their appointments are announced publicly.
The guidelines set out in the companys policy on engaging the

external auditors to provide non-audit services include ascertaining
that: the skills and experience of the external auditors make them a
suitable supplier of the non-audit services; adequate safeguards are
in place so that the objectivity and independence of the audit are not
compromised; and the fee levels relative to the annual audit fee are
within the limits set by the Committee.
The Committee met once during 2005 in full session and twice on a
quorate basis. All members were present at the full meeting.
The company also has well-established policies, including a Code of

Ethics, which is available on its website, and a help-line facility for the
reporting and investigation of unlawful conduct. No waivers to the
Code were made in 2005.
Remuneration Report
The Remuneration Report can be found on pages 37 to 54.
The Combined Code
The Committee met in full session five times in 2005 and five times
on a quorate basis. Each full session was attended by all members
except Sir Robert Wilson, who was unable to attend one meeting.
Throughout 2005, the company complied with the Code provisions

of the Combined Code, except as follows:
Nominations Committee Report

The Nominations Committees terms of reference include responsibility
for proposing the appointment of Board and Committee members.
During 2005, the Committee made recommendations to the Board on
the appointment of Mr de Swaan as a Non-Executive Director.
B.1.1 In designing schemes of performance-related remuneration,

the Remuneration Committee should follow the provisions in
Schedule A to the Code. Item 6 of Schedule A states that, in general,
only basic salary should be pensionable. The companys position is
explained in the Remuneration Report on pages 37 to 54.
35
The Committee also recommended to the Board the appointment of

Sir Deryck Maughan to the Audit Committee in January 2005 and Dr
Schmitz to the Remuneration Committee in May 2005. In February
2006, the Committee recommended to the Board that Dr Moncef
Slaoui, succeed Dr Yamada as Chairman, Research & Development on
his retirement from the company on 1st June 2006.
the Heads of each of the Groups compliance and audit groups

reported on their audit scope, annual coverage, audit resources and
on the results of audits conducted throughout the year
continued
Sarbanes-Oxley also introduced a requirement for the CEO and the

CFO to complete formal certifications, confirming that:
C.3.1 The Board should satisfy itself that at least one member of
the Audit Committee has recent and relevant financial experience.
The companys position is explained on page 34. See page 34 for
the position from 1st January 2006.
they have each reviewed the Annual Report and Form 20-F
based on their knowledge, it contains no material misstatements or
omissions
D.2.3 The Chairman should arrange for the Chairmen of the

Audit, Remuneration and Nominations Committees to be available
to answer questions at the AGM and for all Directors to attend. The
companys position is explained on pages 31 and 32.
based on their knowledge, the financial statements and other

financial information fairly present, in all material respects, the
financial condition, results of operations and cash flows as of the
dates, and for the periods, presented in the Annual Report and
Form 20-F

A number of provisions of US law and regulation apply to GSK
because the companys shares are quoted on the New York Stock
Exchange (NYSE) in the form of ADSs.
they are responsible for establishing and maintaining disclosure

controls and procedures that ensure that material information is
made known to them, have evaluated the effectiveness of these
controls and procedures as at the year end, the results of such
evaluation being contained in the Annual Report and Form 20-F
and have disclosed in the Annual Report and Form 20-F any changes
in internal controls over financial reporting during the period covered
by the Annual Report and Form 20-F that have materially affected,
or are reasonably likely to affect materially, the companys internal
control over financial reporting
NYSE rules
In general, the NYSE rules permit the company to follow UK corporate
governance practices instead of those applied in the USA, provided
that the company explains any significant variations. This explanation
is on the companys website. NYSE rules that came into effect in 2005
require the company to file annual and interim written affirmations
concerning the Audit Committee and the companys statement on
significant differences in corporate governance.
they have disclosed, based on their most recent evaluation of

internal control over financial reporting, to the external auditors and
the Audit Committee all significant deficiencies and material
weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to affect adversely
the companys ability to record, process, summarise and report
financial information and any fraud (regardless of materiality)
involving persons that have a significant role in the companys
internal control over financial reporting.
Sarbanes-Oxley Act of 2002

Following a number of corporate and accounting scandals in the USA,
Congress passed the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley).
Sarbanes-Oxley established new standards for corporate accountability for companies listed in the USA. Although the companys
corporate governance structure was believed to be robust and in line
with best practice, certain changes were necessary to ensure
compliance with Sarbanes-Oxley.
As recommended by the Securities and Exchange Commission (SEC),
GSK has established a Disclosure Committee. The Committee reports
to the CEO, the CFO and to the Audit Committee. It is chaired by the
Company Secretary and the members consist of senior managers
from finance, legal, compliance, corporate communications and
investor relations.
The CEO and CFO have completed these certifications, which will be
filed with the SEC as part of the Groups Form 20-F.
Controls and procedures

The Group carried out an evaluation under the supervision and with
the participation, of the Groups management, including the CEO
and CFO, of the effectiveness of the design and operation of the
Groups disclosure controls and procedures as at 31st December
2005. There are inherent limitations to the effectiveness of any
system of disclosure controls and procedures, including the possibility
of human error and the circumvention or overriding of the controls
and procedures.
External legal counsel and the external auditors are invited to attend
its meetings periodically. It has responsibility for considering the
materiality of information and, on a timely basis, determining the
disclosure of that information. It has responsibility for the timely filing
of reports with the SEC and the formal review of the Annual Report
and Form 20-F. In 2005, the Committee met eleven times.
Accordingly, even effective disclosure controls and procedures can

only provide reasonable assurance of achieving their control objectives.
Based upon the Groups evaluation, the CEO and CFO have concluded
that, as at 31st December 2005, the disclosure controls and
procedures were effective to provide reasonable assurance that
information required to be disclosed in the reports the Group files
and submits under the US Securities Exchange Act of 1934, as
amended, is recorded, processed, summarised and reported as and
when required and that it is accumulated and communicated to
management, including the CEO and CFO, as appropriate, to allow
timely decisions regarding required disclosure.
Sarbanes-Oxley requires that the Annual Report contains a statement

as to whether a member of the companys Audit Committee is an
audit committee financial expert.
For an explanation and details of the basis for the Boards judgement
on this matter, refer to page 34.
For accounting periods ending on or after 15th July 2006, SarbanesOxley requires that the companys Form 20-F contain a report stating
the responsibility of management for establishing and maintaining
adequate internal control over financial reporting and assessing the
effectiveness of the companys internal control over financial reporting.
There have been no changes in the Groups internal control over

financial reporting during 2005 that have materially affected, or are
reasonably likely to affect materially, the Groups internal control over
financial reporting.
Although the company is not required to report compliance in its

2005 Form 20-F, management has undertaken a process to ensure
that it will be in a position to report compliance by the due date.
36
The Remuneration Report sets out the remuneration policies operated

by GSK in respect of the Directors and Corporate Executive Team
(CET) members, together with disclosures on Directors remuneration
including those required by The Directors Remuneration Report
Regulations 2002 (the Regulations). In accordance with the
Regulations, the following sections of the Remuneration Report are
subject to audit: Annual remuneration; Non-Executive Directors
remuneration; Share options; Incentive plans; performance criteria on
Performance Share Plans and share options; and Pensions for which
the opinion thereon is expressed on page 166. The remaining sections
are not subject to audit nor are the pages referred to from within the
audited sections.
This Report is submitted to shareholders by the Board for approval at
the Annual General Meeting, as referenced in the notice of Annual
General Meeting.
Throughout the Remuneration Report the Executive Directors and
CET members are referred to as the Executives.
References to GlaxoSmithKline shares and ADSs mean, respectively,
Ordinary Shares of GlaxoSmithKline plc of 25p and American
Depository Shares of GlaxoSmithKline plc. Each ADS represents two
GlaxoSmithKline shares.
Introduction
Remuneration policy
Executive Director terms, conditions and remuneration
Non-Executive Director terms, conditions and fees
Directors and Senior Management remuneration
Annual remuneration
Non-Executive Directors remuneration
Directors interests
Share options
Incentive plans
Pensions
Directors and Senior Management
Directors interests in contracts
37
38
38
42
44
44
45
46
48
49
51
53
54
54
Remuneration Report
Remuneration Report
continued
Introduction
Remuneration policy
The Remuneration Committee (or Committee) is responsible for

making recommendations to the Board on the companys
remuneration policy and, within the terms of the agreed policy,
determining the total individual remuneration packages of the
Executives.
Principles
The four core principles which underpin the remuneration policy for
GlaxoSmithKline are:
securing outstanding executive talent
pay for performance and only for performance
robust and transparent governance structures
a commitment to be a leader of good remuneration practice in the
pharmaceutical industry.
The remuneration policy set out in this Report was finalised after
undertaking an extensive consultation process with shareholders and
institutional bodies during the course of 2003 and 2004.
The Chairman of the Remuneration Committee continues to have
regular dialogue with institutional investors regarding GSKs
remuneration policy.
In formulating the policy, the Committee also decided that:

the remuneration structure must support the needs of the business
in a very competitive market place
UK shareholder guidelines will be followed to the maximum extent
consistent with the needs of the business and the company would
maintain a regular dialogue with shareholders
global pharmaceutical companies are the primary pay comparator
group
performance conditions would be based on the measurable delivery
of strong financial performance and the delivery of superior returns
to shareholders as compared with other pharmaceutical companies
a high proportion of the total remuneration opportunity will be
based on performance-related remuneration which will be delivered
over the medium to long term
remuneration would be determined using the projected value
method (see Benchmarking below)
there would be one remuneration structure for Executive Directors
and the CET with the same performance conditions, applying
equally to their long-term incentive awards
no ex-gratia payments will be made
pay structures would be as simple as is consistent with the business
needs.
GlaxoSmithKlines remuneration policy is designed to establish a

framework for remuneration that is consistent with the companys
scale and scope of operations, meets the recruitment needs of the
business and is closely aligned with UK shareholder guidelines. As at
31st December 2005, the company was the second largest
pharmaceutical company in the world by revenue, with operations on
five continents with products sold in over 130 countries and with
around 50% of sales being generated in the USA.
Remuneration Committee
Sir Robert Wilson has been Chairman of the Committee since 17th
May 2004. Sir Crispin Davis and Mr Culp were members of the
Committee throughout 2005. Dr Schmitz was appointed to the
Committee in May 2005. The Board deemed all of the members of
the Committee to be independent Non-Executive Directors in
accordance with the Combined Code.
The Committee met five times during 2005 with each member
attending as follows:
Name
Sir Robert Wilson

Mr L Culp
Sir Crispin Davis
Dr Ronaldo Schmitz
Number of meetings
held whilst a
Committee member
Number of meetings
attended by
Committee member
5
5
5
4
5
5
5
4
Overall, the policy is intended to provide median total remuneration

for median performance. Poor performance will result in total
remuneration significantly below the pay comparator group median,
with the opportunity to earn upper quartile total remuneration for
exceptional performance.
This strong alignment with performance is demonstrably in the
interests of shareholders and provides the Executives with
unambiguous signals about the importance of delivering success to
the companys shareholders.
Three quorate meetings were held to approve the formal grant of

share options and performance share awards to give effect to the
Committees decisions.
With the exception of the Company Secretary, no employees of the
company were involved in the conduct of Committee meetings. Dr
Garnier (CEO) and the Senior Vice President, Human Resources, were
invited to attend part of some meetings of the Committee as required.
Commitment
The Committee will apply this policy on a consistent and transparent
basis. Any significant changes in the measures used to assess
performance will be discussed with shareholders. In the use of
comparators for pay benchmarking, the Committee will use its
discretion to ensure that remuneration levels are reasonable, and if it
believes that changes may cause concern amongst shareholders, the
position will be discussed with shareholders prior to implementation.
Deloitte & Touche LLP (Deloitte) have been appointed by the

Committee to provide it with independent advice on executive
remuneration.
Deloitte provided other consulting services to GSK during the year, but
did not provide advice on executive remuneration matters other than
to the Committee.
Towers Perrin provides market data and data analysis to the
Committee.
38
Remuneration Report
continued
Pay and performance comparators

The following table sets out the companies used for pay and
performance comparison:
Abbott Laboratories
AstraZeneca
Bristol-Myers Squibb
Eli Lilly
GlaxoSmithKline
Johnson & Johnson
Merck
Novartis
Pfizer
Roche Holdings
Sanofi-Aventis
Schering-Plough
Takeda Pharmaceutical Company
Wyeth
Country
USA
UK
USA
USA
UK
USA
USA
Switzerland
USA
Switzerland
France
USA
Japan
USA
35,561
44,693
26,140
37,396
85,497
103,950
40,440
80,419
99,942
61,334
70,997
17,915
27,949
35,952
Individual elements of remuneration

The balance between the fixed (base salary) and variable (annual
bonus and long-term incentive) elements of remuneration changes
with performance. The chart below shows the anticipated normal
range of the mix between fixed and variable pay at different levels of
performance for the CEO and the typical case for the other Executive
Directors (ED). In some years, the ranges may be higher or lower,
depending on the performance of the company and the individual.
CEO
ED
5%-40%
10%-50%
15%-20%
20%-25%
40%-80%
25%-70%
100 %
Base salary
The merger of Aventis and Sanofi-Synthelabo during 2004 reduced the

size of the comparator group to 13 companies and GlaxoSmithKline.
The Committee subsequently determined that for a number of reasons,
including focus of operation and market capitalisation, there was no
other suitable company to add to the group.
Annual bonus
Long-term incentives
Base salary
Base salaries are set by reference to the median for the relevant market.
For Executives, this is the pharmaceutical pay comparator group. Actual
salary levels are reviewed annually and may vary depending on an
Executives experience, responsibility and market value. Any changes
usually take effect from 1st April. Following a market data review, base
salaries for Dr Garnier and Dr Yamada were increased by 5.1% to
$1,600,000 and 6.9% to $775,000, respectively, with effect from 1st
April 2005 in line with stated policy in relation to base salary
positioning. The base salary for Mr Coombe prior to his retirement on
31st March 2005 was 509,850. The base salary on appointment for
Mr Julian Heslop, who succeeded Mr Coombe, was 320,000.
Following a market data review, undertaken in February 2006, the
base salary for Dr Garnier and Dr Yamada was increased by 8% to
$1,730,000 and by 3% to $800,000, respectively. Mr Heslops base
salary was increased by 25% to 400,000 following the Committees
review of his performance as CFO since his appointment to the role
on 1st April 2005. Salary increases take effect 1st April 2006.
Benchmarking
For benchmarking purposes, total remuneration incorporates base
salary, annual bonus and long-term incentives. When setting pay, the
Committee has due regard to the Executives pension arrangements.
The global pharmaceutical industry is used as the primary pay
comparator for the Executives, as it is the appropriate marketplace
for the companys most senior executive talent. In the first instance,
pay is benchmarked to publicly available remuneration data for
these companies.
To provide context to the above information, reference is made to
the Towers Perrin annual global pharmaceutical pay survey for the
Pharmaceutical Human Resources Association (PHRA). To ensure that
the global pharmaceutical industry benchmark is subject to scrutiny
and review, the Committee also considers pay data from other global
businesses primarily in the consumer and the manufacturing sectors.
Annual bonus
All bonuses are determined on the basis of a formal review of annual
performance against stretching financial targets based on profit
before interest and tax and are subject to detailed assessment of
individual, business unit and Group achievements against objectives.
No bonus is payable if financial performance is less than 96% of the
target performance. The individual performance against objectives
can increase or decrease the bonus level by a factor which can range
from zero to 1.5. Bonuses are subject to upper limits, which for the
Executives other than the CEO, range between 100% and 200% of
base salary. The CEOs limit is 200%.
Prior to determining the annual long-term incentive opportunity, the

Committee considers a range of vesting levels that may be achieved
based on different assumptions, such as share price growth,
performance levels etc. For performance in line with expectations,
total remuneration is targeted at the median of the comparator group
and the long-term incentive opportunity is set in a way which provides
for positioning of total remuneration at the median.
To ensure that a stable benchmark is developed and to reduce the
impact of short-term fluctuations, incentive policies for other global
pharmaceutical companies are assessed over a number of years.
An annual bonus paid on the basis of on-target business performance

together with base salary provides annual cash in line with the median
of the pay comparator group.
Valuation method
The projected value method is used to benchmark total remuneration.
This method projects the future value of the remuneration package
under different performance scenarios, whilst moderating the impact
of market fluctuations in the short term and strengthening the focus
on performance.
In the case of the CEO, the bonus targets are set by the Board. In
setting the objectives for the CEO, the Board takes into account the
strategies that have been developed by the company, and are set out
on page 6 of the Annual Report.
39
Company
Market Cap
31.12.05
m
Following the independent review in 2003, the Committee made a

deliberate and conscious decision to use the projected value method
for pay benchmarking purposes as it enables a comparison of
packages with different structural characteristics and provides an
insight into the value gearing of different equity instruments.
Remuneration Report
continued
Historically, the performance period for awards made in the fourth

quarter started on 1st January following the date of award. For LTI
awards made in 2006 and thereafter, the performance period starts
on 1st January of the year of award (i.e. 1st January 2006 for awards
made in February 2006).
The objectives set for 2005 focussed in particular on building the best
product pipeline in the industry, delivering commercial and operational
excellence and, in addition, formulating and updating the strategic
plan for the vaccines business.
For reasons of commercial sensitivity, the specific objectives set against
the strategic business drivers are kept confidential. Following the end
of the financial year, the Board reviews the CEOs performance
generally and against the set objectives, and the Committee then
determines the bonus payable. The CEO makes recommendations to
the Committee regarding the performance level achieved against
objectives for the other Executives. These recommendations are then
considered by the Committee to determine the resultant bonus.
No compensation was provided for the change in the awards cycle.

Full disclosure of LTI awards made to the Executive Directors in
February 2006 will be made in the Remuneration Report for 2006. The
summary details of the LTI awards made to the Executive Directors in
February 2006 are set out on page 51 of the Remuneration Report.
Performance share awards and share options are delivered to US
resident executives in the form of ADSs. Awards are delivered in the
form of Ordinary Shares to executives resident in the UK and other
countries. All awards are made under plans which incorporate dilution
limits consistent with the guidelines provided by the Association of
British Insurers, the National Association of Pension Funds and other
shareholder representative bodies. Current estimated dilution from
existing awards under all GlaxoSmithKline employee share schemes
made since the merger is approximately 5% of the companys share
capital at 31st December 2005.
In determining bonus awards for 2005, the Committee took into

account the excellent financial performance during the year and the
encouraging progress in building the pipeline of new products.
In light of the low take up levels and in response to concerns expressed
by institutional investors in relation to the 1 for 10 non-performance
related match provided under the Annual Incentive Plan (AIP), the
Committee decided to discontinue the AIP. Under the AIP, and its US
equivalent, eligible employees could elect to invest their bonus in GSK
shares or ADSs for a minimum period of three years. At the end of
the three-year holding period, participants (including Executives) are
entitled to a matching award of 10% of their deferred shareholding.
The match is not subject to further performance conditions. This AIP
was open to approximately 700 senior executives who all participated
on the same terms. The last deferral elections under the AIP were
made in respect to bonuses earned during 2005. Although the AIP
has now closed, GSK will continue to manage the ongoing
administration of subsisting awards as required by the AIP rules.
In 2005, the Committee, assisted by Deloitte, undertook a review of

the current performance measures used under the GSK LTI plans.
After extensive and careful consideration, the Committee concluded
that the measures currently used under the LTI plans remain
appropriate and relevant, although in the case of the Share Option
Plan, it was agreed that the annualised growth in EPS to achieve
100% vesting for the awards granted in 2006, would be increased
from RPI + 5% to RPI +6% .
a) Performance shares
For the Executives, the level of performance shares vesting is based
on the companys Total Shareholder Return (TSR) relative to the
performance comparator group (see page 39) over a three-year
measurement period. TSR was chosen as the most appropriate
comparative measure since it focuses on the return to shareholders,
is a well-understood and tested mechanism to measure performance
and allows comparison between companies operating in different
countries.
Long-term incentives
Executives are eligible for performance share awards and share
options. The remuneration policy provides that annual long-term
incentive (LTI) awards will normally be made up of a performance
share award and a share option award.
The Committee considers that performance shares provide a stronger
alignment to shareholder value, and therefore the remuneration policy
places greater emphasis on the use of performance shares. LTI awards
are determined such that for on-target performance more than half
of the long-term incentive reward is derived from performance shares.
TSR is measured in sterling over the performance period and

represents the change in the value of a share together with the value
of reinvested dividends paid. In order to remove the impact of the
varying tax treatments of dividends in different jurisdictions, all
dividends are reinvested gross.
The annual grant of LTI awards using more than one plan is consistent
with the practice of the pay comparator group and other leading UK
companies. LTIs for the CET are provided on the same basis as the
Executive Directors. The level of the annual LTI opportunity is
considered carefully year-on-year by the Committee in the context of
market practice.
As a result of the change in the LTI award cycle for all eligible
employees, no performance share awards were made in 2005 to the
Executives. In respect of the performance share awards granted in
December 2004 and in February 2006, with the performance periods
of 1st January 2005 to 31st December 2007 and 1st January 2006 to
31st December 2008, respectively, if GSK is ranked at position seven
(the mid-point) of the performance comparator group, 35% of the
shares will vest. Any ranking below this point will result in no shares
vesting. Only if GSK is one of the top two companies will all of the
shares vest. When determining vesting levels, the Committee has
regard for the companys underlying financial performance.
To align the award cycles more closely with GSKs financial year and
budgeting process, the Committee decided to change the annual
grant date for LTI awards for all eligible employees from the fourth
quarter of each year to the first quarter of each year.
This change took effect from 2005 and thus LTI awards that would
otherwise have been made in the fourth quarter of 2005 were made
instead in February 2006. This change in award cycle does not affect
the performance period.
40
Remuneration Report
TSR rank with 13 companies &
GlaxoSmithKline
1
2
3
4
5
6
7
Below 7
Following the introduction of International Financial Reporting

Standards (IFRS) on 1st January 2005, the Committee considered what
EPS measurement basis, either IFRS or UK GAAP, should be used for
share options and performance share plan awards (prior to 2003 see
page 50), with EPS performance conditions having performance
periods that straddled the IFRS conversion date. The Committee
agreed that for the purpose of measuring EPS growth in determining
whether vesting targets had been achieved, UK GAAP would be used
for the 2002 grant (performance period: 1st January 2003 to 31st
December 2005) as two out of three years would be reported under
UK GAAP. This would require the 2005 CER growth to be restated on
a UK GAAP basis. IFRS would be used for the 2003 grant
(performance period: 1st January 2004 to 31st December 2006) as
two out of the three years would be reported under IFRS.
Percentage of
award vesting*
100%
100%
87%
74%
61%
48%
35%
0%
* TSR is measured on a pro-rata basis. Where GlaxoSmithKlines performance

falls between two of the comparators, the level of vesting will be determined
by the actual relative level of TSR rather than simple ranking.
To provide a closer link between shareholder returns and payments

to the Executives, notional dividends are reinvested and paid out in
proportion to the vesting of the award. The receipt of dividends has
been incorporated into the benchmarking of award levels. In addition,
performance shares earned by the Executives cannot be sold, except
to meet related tax liabilities, for a further two years following the end
of the vesting period. The Committee believes that this further aligns
the interests of the Executives with the long-term interests of
shareholders.
As a result of the change in the LTI award cycle for all eligible
employees, no share options were granted to Executives in 2005.
For share option grants in 2006, vesting increases on a straight-line
basis for EPS performance between the hurdles set out in the
following graph.
Exceptional
100%
The vesting table for the performance share awards granted in

December 2003, with the performance period 1st January 2004 to
31st December 2006, is given on page 52.
Vesting percentage
Superior
b) Share options
Share options allow a holder to buy shares at a future date at the
share price prevailing at the time of grant. Share options are granted
to more than 12,000 managers at GlaxoSmithKline, including the
Executives. The vesting of the share options granted to the Executives
is linked to the achievement of compound annual EPS growth over
the performance period.
The Committee considered that EPS was the key measure of the
performance of the business and was also fully reflected through the
business measures extended throughout the Group, ensuring
organisational alignment.
Baseline
50%
Threshold
0%
RPI+3%
p.a.
RPI+4%
p.a.
RPI+5%
p.a.
RPI+6%
p.a.
EPS Target
When setting EPS targets, the Committee considers the companys

internal projections and analysts forecasts for GlaxoSmithKlines EPS
performance, as well as analysts forecasts for the pharmaceutical
industry.
This performance condition is substantially consistent with UK

shareholder guidelines and expectations and is demanding when
compared with those operated by other global pharmaceutical
companies. This is consistent with the policy of providing pay for
performance and only for performance.
The following key principles govern the use of EPS as a performance

measure:
Performance is measured over periods of three financial years, which

commence on the basis set out on page 40. There is no performance
retesting, so if the performance condition is not met after the threeyear period, the options will lapse.
adjustments will only be considered for major items

adjustments will be for the judgement of the Committee
the purpose of the adjustments is to ensure that the performance
measurement is fair and reasonable to both participants and
shareholders
any discretion exercised by the Committee will be disclosed to
shareholders in the Annual Report.
Pensions
The Executives participate in GlaxoSmithKline senior executive pension
plans. The pension arrangements are structured in accordance with
the plans operated for executives in the country in which the
executives are likely to retire. Benefits are normally payable at age 60.
Details of individual arrangements for the Executive Directors are set
out on page 43. In response to the future pensions regime in the UK,
the Committee carefully considered the impact of the change in
legislation and has decided the following:
The Committee will set out the basis of its decision if it considers it
appropriate to make any adjustment.
41
continued
Remuneration Report
continued
The Sharesave plan and the ShareReward plan are Inland Revenueapproved plans open to all UK employees on the same terms. Mr
Heslop is a member of the Sharesave plan, into which he contributes
250 a month. This provides him with the option to buy shares at the
end of the three-year savings period in line with the opportunity
available to all UK employees.
the company will continue to fulfil its obligations under existing

pension arrangements
no compensation will be provided if participants are adversely
affected by the new pension regime.
In coming to these decisions, the Committee took account of the

following:
Mr Heslop also contributes 125 per month to buy shares under the
ShareReward plan. The company matches the number of shares
bought each month.
new executive hires benefit from a 15%, plus 4% match

opportunity, of base pay under the defined contribution plan in the
UK, and a contribution equal to 5% of base salary plus under the
bonus cash balance plan in the USA
in the UK, legacy final salary plans were grandfathered for existing
employees and no new entrants have been allowed. For capped
employees, benefits in excess of the cap are currently all provided
through unfunded arrangements
for capped employees in the USA, benefits above the cap are
provided by a non-qualified plan.
The Executives also receive other benefits including healthcare

(medical and dental), personal financial advice and life assurance. The
cash value of the benefits received by the Executive Directors in 2005
is shown on page 45.
Executive Director terms, conditions and

remuneration
Executive Director contracts
The policy regarding the Executive Directors contracts was the subject
of extensive review and change during 2003. The policy provides the
framework for contracts for Executive Directors appointed since and
going forward.
Share ownership requirements

To align the interests of executives with those of shareholders,
executives are required to maintain significant holdings of shares in
GlaxoSmithKline. These requirements are an important part of
aligning the interests of executives with shareholders. The CEO is
required to hold shares to the value of four times base salary. Other
Executive Directors are required to build a shareholding to the value
of three times base salary. Members of the CET are required to build
a shareholding to a value of two times base salary. The other top 700
executives in the Group are required to build a shareholding to a value
of one times base salary. Executives are required to continue to satisfy
these shareholding requirements for a minimum of twelve months
following retirement from the company.
The key aspects of GlaxoSmithKlines contractual framework are:
In order for shares to qualify for these share ownership requirements

they must be held personally by the Executive or their spouse or
minor children or have been earned but deferred under one of the
share programmes operated by the company. Unexercised share
options are not included in this calculation. As at 31st December
2005, Dr Garniers holding was 225,896 ADSs, Dr Yamadas was
67,512 ADSs and Mr Heslops was 18,885 ordinary shares. Dr
Garniers and Dr Yamadas holdings were in excess of the share
ownership requirements. Mr Heslop has until December 2008 to
build his holding to the value of three times base salary. Mr Coombe's
shareholding at 31st December 2005, was in excess of the share
ownership requirements following his retirement from the Board on
31st March 2005.
Other remuneration elements

The Executives participate in various legacy Glaxo Wellcome and
SmithKline Beecham all-employee share plans in either the UK or the
USA and in the GlaxoSmithKline plans that replaced them.
Aspect
Policy
Notice period on
termination by the
employing company
or executive
12 calendar months
Termination payment
1x annual salary and

1x annual on-target bonus 1
No mitigation required 2
Benefits
Governed by benefits policy,

including:
healthcare (medical and dental)
personal financial advice
life assurance contributions
Vesting of long-term
incentives
Rules of relevant equity incentive

plan 3
Pension
Based on existing arrangements and

terms of the relevant pension plan
Non-compete clause
12 months from termination

notice date 2
1 Dr Garniers target bonus is 100% of salary, Dr Yamadas is 85% of salary and Mr

Heslops is 75% of salary.
2 The imposition of a 12-month non-compete period on the Executives is considered
vitally important by the company in order to protect the Groups intellectual property.
In light of the non-compete clause and competitor practice, the Committee believes
that it would not be appropriate to provide for mitigation in the contracts. When
reviewing the level of severance payments, the Committee considered investor and DTI
guidance. However, it determined that in line with competitive practice it is appropriate
to provide for the payment of salary and target bonus on termination.
3 As approved by shareholders of GlaxoSmithKline, Glaxo Wellcome and SmithKline
Beecham, as appropriate.
42
Remuneration Report
continued
Prior to 1999 all US employees, including Dr Garnier and Dr Yamada,

were moved from a final salary pension arrangement to the current
cash balance structure. For all employees in the US, cash balance plan
contributions are based on combined annual salary and annual bonus.
In Dr Garniers case, these include the entitlement to reimbursement

of excise tax on change of control related payments, life insurance
benefit funded by the company to age 65 and the following provisions
relating to the vesting of long-term incentives:
Mr Heslop participates in the Glaxo Wellcome defined benefit plan

with an accrual rate of 1/30th of final pensionable salary per annum.
In 2000 all benefits accrued under the Glaxo Wellcome UK pension
arrangements were augmented by the Trustees of the plans by 5% to
reflect a distribution of surplus. This augmentation will apply to that
element of Mr Heslops pension earnings before 31st March 2000.
Pre-2003 awards
On termination by the company (other than for cause), on
retirement or on resignation for good reason (i.e. resignation due
to not being elected or retained as a director of the company or any
merged company, or as a result of a change of control provided
that such resignation occurs on or within 30 days of the first
anniversary of the change in control), options will vest in full and
remain exercisable for the full option term, and performance shares
will vest at the end of the performance period subject to
performance but not time-apportioned.
Other entitlements
In addition to the contractual provisions outlined above, in the event
that Executive Directors service agreements are terminated by their
employing company, the following would apply:
in the case of awards under the GlaxoSmithKline Annual Investment
Plan, provided that their agreement is terminated other than for
cause, any deferred amount, any income and gains, are
automatically distributed as soon as administratively practicable after
termination. If they resign, retire or the termination is for cause,
then any deferred amount is not distributed until the end of the
minimum three-year deferral period
2003 and thereafter

Awards for the above provisions apply, but options will be subject
to performance testing in all circumstances, and any options or
performance share awards made 12 months prior to the termination
notice date will lapse.
in line with the policy applicable to US senior executives, Dr Garnier

and Dr Yamada are entitled to receive continuing medical and dental
insurance
In addition, Dr Garnier and Dr Yamada are entitled to receive one

years worth of pension contributions on termination.
Dr Garniers contract was executed on 3rd March 2004 and took
effect from 1st January 2004. His contract will expire on 31st October
2007 being the last day of the month in which he will reach his 60th
birthday. Dr Yamadas contract was executed on 27th July 2004 and
took effect from 1st January 2004. Dr Yamada will retire from the
Board and the company on 1st June 2006. Mr Coombes contract
was executed on 3rd March 2004, took effect from 1st January 2004
and expired on 31st March 2005.
following the merger, those participants in the legacy share option

schemes who elected to exchange their legacy options for options
over GlaxoSmithKline shares will receive an additional cash benefit
equal to 10% of the grant price of the original option. This
additional benefit is triggered when the new option is exercised or
lapses. To qualify for this additional cash benefit, participants had
to retain their options until at least the second anniversary of the
effective date of the merger.
Mr Heslops contract was executed on 16th March 2005 and took

effect from 1st April 2005. Mr Heslops contract will expire on 31st
January 2014, being the last day of the month in which he reaches
his 60th birthday.
Outside appointments for Executive Directors

Any outside appointments must be approved by the Chairman on
behalf of the Board. It is the companys policy that remuneration
earned from such appointments may be kept by the individual
Executive Director.
No termination payments will be made in respect of any part of a

notice period extending beyond the contract expiry dates.
Individual pension arrangements

The UK plan provides for a pension based on two-thirds of final salary
at age 60. The US cash balance plan provides for an annual
contribution and interest on the sum accumulated in the cash balance
plan but with no contractual promise to provide specific levels of
retirement income.
43
GlaxoSmithKline makes annual contributions of 15% of Dr Garniers

annual salary and bonus and 18% of Dr Yamadas annual salary and
bonus. The fund increases at an interest rate based on the yield on
30-year treasury bonds. The company has no liability beyond making
these annual contributions.
Following the independent review of remuneration undertaken in

2003, Dr Garnier, Mr Coombe and Dr Yamada agreed to changes in
their previous contractual terms without compensation to come
broadly in line with the new contractual framework, including the
reduction of contractual notice period from 24 to 12 calendar months.
However, in order to honour certain aspects of their old contractual
terms, there are a number of individual features which have been
retained.
Remuneration Report
continued
Other Non-Executive Directors

On appointment, each Non-Executive Director is provided with a letter
of appointment under which it is agreed that they serve the company
as a Non-Executive Director until the conclusion of the Annual General
Meeting following the third anniversary of their appointment. In each
case this can be extended for a further term of three years by mutual
agreement. No Directors serve a term longer than three years without
offering themselves for re-election by the shareholders.
Non-Executive Directors of GlaxoSmithKline do not have service

contracts but instead have letters of appointment. The company aims
to provide Non-Executive Directors with fees that are competitive with
other companies of equivalent size and complexity. The fee structure
for the Non-Executive Directors is as follows:
Per annum
Standard annual cash retainer fee
60,000
Supplemental fees
Senior Independent Director, the Audit Committee
Chairman and Scientific/Medical Experts
Chairmen of the Remuneration and
Corporate Responsibility Committees
30,000
Non-Executive Director undertaking

intercontinental travel to meetings
The following table shows the date of the letter of appointment of

each Non-Executive Director:
Non-Executive
Director
Date of letter
of appointment
Mr L Culp
Sir Crispin Davis
Sir Deryck Maughan
Sir Ian Prosser
Dr R Schmitz
Dr L Shapiro
Mr T de Swaan
Sir Robert Wilson
20,000
5,000 per meeting
Automatic share allocation

To enhance the link between Directors and shareholders
GlaxoSmithKline requires Non-Executive Directors to receive a
significant part of their fees in the form of shares. With effect from
1st October 2004, at least 25% of the Non-Executive Directors total
fees, excluding the Chairman, are paid in the form of shares and
allocated to a share account. The Non-Executive Directors may also
take the opportunity to invest part or all of the balance of their fees
into the same share account.
09.06.03
09.06.03
26.05.04
19.06.00
19.06.00
19.06.00
21.12.05
09.06.03
TSR performance graph

The following graph sets out the performance of the company relative
to the FTSE 100 Index of which the company is a constituent and to
the performance comparator group since the merger on 27th
December 2000. The graph has been prepared in accordance with the
Regulations and is not an indication of the likely vesting of awards
granted under any of the companys incentive plans.
Exchange rate
Fees that are paid in US Dollars are converted at a rate of
1/US$1.8162, being the exchange rate that applied on 29th July
2004 when the new fee arrangements were approved by the Board.
110
Non-Executive Directors are not entitled to compensation if their

appointment is terminated.
100
Chairman
Sir Christopher Hogg retired as Chairman with effect from 31st
December 2004. Sir Christopher Gents letter of appointment to the
Board was dated 26th May 2004, under which it was agreed that he
serve the company as Deputy Chairman until 31st December 2004
and from 1st January 2005 as Chairman until the conclusion of the
Annual General Meeting following the third anniversary of his
appointment. This may be extended for a further term of three years
by mutual agreement. He received fees at the rate of 240,000 per
annum plus an allocation of GlaxoSmithKline shares to the value of
60,000 per annum whilst Deputy Chairman, and receives 400,000
per annum plus an allocation of GlaxoSmithKline shares to the value
of 100,000 per annum as Chairman.
90
80
70
60
31/12/00
31/12/01
31/12/02
31/12/03
31/12/04
31/12/05
GSK Total Return Index

GSK Pharma Peers Return Index
FTSE100 Total Return Index

The following tables set out for the Directors of GlaxoSmithKline plc
the remuneration earned in 2005, their interests in shares of
GlaxoSmithKline plc, their interests in share options and incentive
plans and their pension benefits. The members of the CET and the
Company Secretary, known as the Senior Management, also
participate in the same remuneration plans as the Executive Directors
and the aggregate remuneration and interests of the Directors and
Senior Management are also provided.
44
Remuneration Report
continued
Annual remuneration
2005
a,b,c
a,b,c
Total Current Executive Directors

Former Executive Director
Mr J Coombe
b,c,d
Fees and
salary
000
Other
benefits
000
$1,582
240
$763
$641
9
$739
$2,812 $1,556
280
$1,110
$698
1,528
767
2,436 1,238
139
32
1,667
799
Current Non-Executive Directors

Mr L Culp
Sir Crispin Davis
Sir Deryck Maughan
Sir Ian Prosser
Dr R Schmitz
Dr L Shapiro
e
Sir Robert Wilson
$136
70
500
$146
100
95
$230
90
Total Current Non-Executive Directors
1,137
Former Non-Executive Directors

Dr M Barzach
f
Sir Christopher Hogg
Sir Roger Hurn
Sir Peter Job
Mr J McArthur
Mr D McHenry
Sir Richard Sykes
58
Total Former Non-Executive Directors
58
Total Executive Directors
Total
Annual
annual
bonus remuneration
000
000
Fees and
salary
000
Other
benefits
000
$6,591
529
$3,310
$1,523
$725
$786
$577
$2,250
$1,001
$4,559
$2,303
5,969
1,228
745
1,777
3,750
171
506
515
2,436 1,238
6,140
1,734
754
1,777
4,265
$136
70
500
$146
100
95
$230
90
$97
57
175
$57
65
72
$182
66
$97
57
175
$57
65
72
$182
66
1,137
618
618
5
5
58
5
5
78
369
57
$42
$42
$18
78
370
57
$60
$42
1
11
69
550
12
562
1,206
1,168
12
1,180
2,436 1,238
7,346
2,902
766
1,777
5,445
Total Non-Executive Directors
1,195
11
Total Remuneration
2,862
810
2004
Remuneration for Directors on the US Payroll is reported in Dollars. Amounts have been converted to Sterling at the average rates for each year.
a) Following the merger, those participants in the legacy share option schemes who elected to exchange their legacy options for options over GlaxoSmithKline shares
were granted an additional cash benefit equal to 10% of the grant price of the original option. This additional benefit, known as the Exchange Offer Incentive
(EOI), is only payable when the new option is exercised or lapses above market value. To qualify for this additional cash benefit, participants had to retain these
options until at least the second anniversary of the effective date of the merger. During the year, Dr Garnier received $174,472 (2004 $335,730) and Dr Yamada
received $167,405 (2004 $nil) relating to options exercised (page 50).
b) Dr Garnier is a Non-Executive Director of United Technologies Corporation, in respect of which in 2005 he received $110,000 (2004 $110,000) in the form of
deferred stock units and 3,000 (2004 3,500) stock options with a grant price of $101.05 (2004 $88.17). Dr Yamada is a member of the Advisory Board of
Quaker BioVentures, Inc., in respect of which in 2005 he received $12,000. Dr Yamada was previously a member of the Board of Directors of diaDexus, Inc., in
respect of which he received in 2004, 30,000 stock appreciation rights with a grant price of $0.40. These amounts are excluded from the table above and retained
by the Executive Directors. Mr Coombe is a member of the Supervisory Board of Siemens and a Non-Executive Director of HSBC Holdings plc, for which, in the
period from 1st January 2005 until his retirement from GlaxoSmithKline on 31st March 2005, he received 12,466 (2004 54,082 and 1,500 stock appreciation
rights with a grant price of 72.54), and 4,583 (2004 nil), respectively.
c) In 2001, following the merger, Dr Garnier, Mr Coombe and Dr Yamada were awarded a one-off special deferred bonus as members of the CET. Each was awarded
an amount equivalent to his annual salary on 31st December 2001 and this was notionally invested in GlaxoSmithKline shares or ADSs on 15th February 2002 and
deferred for three years. The deferred bonus vested on 15th February 2005 and the amounts paid were equivalent to the then value of GlaxoSmithKline shares
or ADSs notionally acquired in February 2002 plus dividends reinvested over the period. Dr Garnier received $1,556,324, and Dr Yamada received $697,663. Mr
Coombe waived his deferred bonus of 383,924. The company made a contribution to the pension plan in 2005 of 383,924 to enhance his pension entitlements.
This amount is not included in the table above.
45
Footnote
Current Executive Directors

Dr JP Garnier
Mr J Heslop
Dr T Yamada
Annual
bonus
000
Total
Deferred
annual
bonus remuneration
000
000
Remuneration Report
continued
d) Mr Coombe waived his prorated 2005 bonus of 106,870 and his 2004 annual bonus of 650,370. The company made a contribution to the pension plan in
2005 of 106,870 and 650,370 to enhance his pension entitlements. These amounts are not included within fees and salary above.
e) Dr Shapiro is a member of GlaxoSmithKlines Scientific Advisory Board for which she received fees of $85,000 (2004 $85,000), of which $30,000 (2004
$30,000) was in the form of ADSs. These are included within fees and salary above.
f) Dr Barzach received fees of 84,244 (2004 83,005) from GlaxoSmithKline France for healthcare consultancy provided. These are included within fees and salary
above.
None of the above Directors received expenses during the year requiring separate disclosure as required by the Regulations.
Mr de Swaan joined the Board as a Non-Executive Director on 1st January 2006. No remuneration is shown for him in the table above.

2005
2004
Total
000
Cash
000
Shares/ADSs
000
Total
000
Cash
000
Shares/ADSs
000

Mr L Culp
Sir Crispin Davis
Sir Deryck Maughan
Sir Ian Prosser
Dr R Schmitz
Dr L Shapiro
Sir Robert Wilson
$136
70
500
$146
100
95
$145
90
400
50
57
$109
68
$136
70
100
$146
50
38
$36
22
$97
57
175
$57
65
72
$97
66
140
28
38
$75
52
$97
57
35
$57
37
34
$22
14

Dr M Barzach
Sir Peter Job
Mr J McArthur
Mr D McHenry
22
369
57
$42
$42
19
150
$37
$37
3
219
57
$5
$5
1,090
635
455
1,066
508
558
Fees and salary
Total
The table above sets out the remuneration received as Non-Executive Directors of GlaxoSmithKline. Accordingly, it does not include Dr Barzachs
fees received from GlaxoSmithKline France for healthcare consultancy provided, or Dr Shapiros fees received as a member of GlaxoSmithKlines
Scientific Advisory Board.
From the formation of GSK, the Non-Executive Directors, have been required to take at least a part of their total fees in the form of shares
allocated to a share account. From 1st October 2004, at least 25% of Non-Executive Directors fees, except those of the Chairman, see page
44 for further details, must be taken under the fee allocation arrangement. Non-Executive Directors can then elect to receive either all or part
of the remaining cash payment in the form of further shares or ADSs. The total value of these shares and ADSs as at the date of award, together
with the cash payment, forms their total fees, which are included within the Annual remuneration table under Fees and salary. The table
above sets out the value of their fees received in the form of cash and shares and ADSs.
The shares and ADSs are notionally awarded to the Non-Executive Directors and allocated to their interest accounts and are included within
the Directors interests tables on page 48. The accumulated balance of these shares and ADSs, together with notional dividends subsequently
reinvested, are not paid out to the Non-Executive Directors until retirement. Upon retirement, the Non-Executive Directors will receive either
the shares and ADSs or a cash amount equal to the value of the shares and ADSs at the date of retirement.
46
Remuneration Report
continued
The table below sets out the accumulated number of shares and ADSs held by each Non-Executive Director in relation to their fees received
as Board members as at 31st December 2005, together with the movements in their account over the year.
Non-Executive Directors share arrangements
Footnote

Shares
Sir Crispin Davis
Sir Ian Prosser
Dr R Schmitz
Dr L Shapiro
Sir Robert Wilson
ADSs
Mr L Culp
Sir Deryck Maughan
Dr L Shapiro
Shares
Sir Roger Hurn
Sir Peter Job
a
a
At 31.12.04
Elected
7,333
2,921
12,520
10,771
1,676
1,337
5,192
7,349
3,728
2,810
47
1,665
233
116
342
317
45
12,758
10,386
16,590
13,898
1,723
3,047
3,348
1,248
2,608
2,769
2,947
752
110
47
66
6,227
4,242
3,426
48,000
11,305
17,638
309
48,000
1,330
17,638
10,284
Paid out
At 31.12.05
Dividends are notionally reinvested at the end of the financial year in which payment is made.
The table below sets out the settlement of former Non-Executive Directors share arrangements on their leaving the Board:
Date of leaving
Prior years
Sir Roger Hurn
Sir Peter Job
a,b
c
a,b
31.12.04
05.06.03
31.12.04
Value of awards Value of awards

on allocation
on leaving
565,857
586,559
225,360
215,538
Payments
in 2005
586,559
18,198
215,538
a) Awards to Sir Christopher Hogg and Sir Peter Job under the Non-Executive Directors share arrangements were settled in full, with a transfer of shares in January
2005.
b) The change in value of awards between allocation and leaving is attributable to dividends re-invested and the change in share price between the dates of award
and the dates of leaving.
c) On leaving the Board, Sir Roger Hurn elected to receive the settlement of his Non-Executive Directors share arrangements in 40 quarterly cash payments.
47
Number of shares and ADSs

Dividends
reinvested
Remuneration Report
continued
Directors interests
The following beneficial interests of the Directors of the company are shown in the register maintained by the company in accordance with
the Companies Act 1985:
Shares
Footnote

Dr JP Garnier
Mr J Heslop
Dr T Yamada
Former Executive Director
Mr J Coombe
Mr L Culp
Sir Crispin Davis
Sir Deryck Maughan
Sir Ian Prosser
Dr R Schmitz
Dr L Shapiro
Mr T de Swaan
Sir Robert Wilson
a
b,d
a
24th February
2006
1st January
2005
24th February
2006
31st December
2005
1st January
2005
18,885
17,547
226,538
73,626
225,896
67,512
204,430
60,923
198,665
186,652
17,925
10,386
17,500
13,898
1,723
4,175
12,500
2,921
13,430
10,771
1,676
2,465
6,227
4,242
2,840
7,401
6,227
4,242
2,840
7,401
3,348
1,248
2,840
5,958
20,512
c,d,e
f
f
f
f
f
f
f
f
f
ADSs
31st December
2005
17,925
10,386
17,500
13,898
1,723
4,175
One GlaxoSmithKline ADS represents two GlaxoSmithKline shares.

a) Includes the equivalent number of ADSs purchased in the GlaxoSmithKline Stock Fund within the 401(k) plan.
b) In the case of Mr Heslop, the opening number of shares is shown at 1st April 2005.
c) In the case of Mr Coombe, the closing number of shares is shown at 31st March 2005.
d) Includes shares purchased through the GlaxoSmithKline ShareReward Plan for Mr Heslop totalling 1,013 shares at 31st December 2005 (1st April 2005 829) and
1,054 shares at 24th February 2006, and for Mr Coombe 829 shares at 31st March 2005 (1st January 2005 763).
e) Mr Coombe left the Board on 31st March 2005, therefore his interests in the company on 24th February 2006 are not included in the table above.
f) Includes shares and ADSs received as part or all of their fees as described under Non-Executive Directors share arrangements on page 46. Dividends received on
these shares and ADSs were converted to shares and ADSs as at 31st December 2005. These are also included in the Directors interests above.
The interests of the above-mentioned Directors at 24th February 2006 reflect changes between the end of the financial year and that date.
48
Remuneration Report
continued
Share options
Options ADSs
At 31.12.04
Date of grant
Exercise period
Grant price
Number
Exercised
At 31.12.05
3,844,648
1,223,358
79,054
74,868
3,765,594
1,148,490
At 31.12.04
Date of grant
Exercise period
Grant price
Number
Exercised
At 31.12.05
27.10.05 01.12.08 31.05.09

n/a
n/a
11.45
n/a
816
n/a
1,031
365,504
1,434,249
Options Shares
Mr J Heslop
Mr J Coombe
Granted
a,b
c
365,719
1,434,249
a) As part of the main option grant that occured on 21st February 2006, with a vesting period of 1st January 2006 to 31st December 2008, Dr Garnier was awarded
500,000 ADS options with a grant price of $51.02. As part of the same grant, Mr Heslop was awarded 231,000 share options with a grant price of 14.68. Dr
Yamada did not receive a grant of options due to his impending retirement from GlaxoSmithKline.
b) Mr Heslop joined the Board on 1st April 2005. These details cover the period from 1st April 2005 to 31st December 2005. The grant included in the table above
relates to the Sharesave plan.
c) Mr Coombe retired on 31st March 2005. These details cover the period from 1st January to 31st March 2005.
For those options outstanding at 31st December 2005, the earliest and latest vesting and lapse dates for those above and below the market
price for a GlaxoSmithKline share at the year end are given in the table below. Those for Mr Coombe are on the following page.
Dr JP Garnier
Above market price (underwater) at year end:
Below market price at year end:
earliest
latest
earliest
latest
$55.99
2,033,448
23.11.01
28.11.04
22.11.08
27.11.11
$55.99
2,033,448
$36.96
$44.15
812,146
920,000
21.11.99
15.12.06
03.12.05
02.12.07
20.11.06
14.12.13
02.12.12
01.12.14
$40.78
1,732,146
$49.00
3,765,594
Weighted average
grant price
Number
earliest
latest
earliest
latest
$56.35
660,591
23.11.01
28.11.04
22.11.08
27.11.11
$56.35
660,591
$37.04
$44.15
211,899
276,000
21.11.99
15.12.06
03.12.05
02.12.07
20.11.06
14.12.13
02.12.12
01.12.14
vested options
unvested options
Total ADS options as at 31st December 2005
vested options
vested options
unvested options
Lapse date
487,899
$49.85
1,148,490
Weighted average
grant price
Number
earliest
latest
earliest
latest
18.17
132,838
31.07.01
28.11.04
30.07.08
27.11.11
18.17
132,838
13.29
11.91
115,600
117,066
25.02.03
28.10.06
03.12.05
01.12.08
24.02.10
31.05.09
02.12.12
01.12.14
12.59
232,666
14.62
365,504
vested options
vested options
unvested options
Total share options as at 31st December 2005
Vesting date
$41.06
Total ADS options as at 31st December 2005
Mr J Heslop
Lapse date
Number
vested options
Dr T Yamada
Vesting date
Weighted average
grant price
Vesting date
49
Lapse date
Dr JP Garnier
Dr T Yamada
Granted
Footnote
Remuneration Report
continued
Mr J Coombe (to 31st March 2005)
Total share options as at 31st March 2005
Lapse date
Number
earliest
latest
earliest
latest
16.97
12.70
867,218
276,000
04.08.02
31.03.08
31.03.11
31.03.08
31.03.07
30.09.08
30.09.11
30.09.08
15.94
1,143,218
11.78
291,031
01.12.05
31.03.12
31.05.06
30.09.12
11.78
291,031
15.10
1,434,249
Above market price (underwater) at period end:vested options

unvested options
Below market price at period end:
Vesting date
Weighted average
grant price
unvested options
The lapse dates for Mr Coombes options have been modified to reflect his retirement in 2005.
GSK grants share options to Executive Directors and Senior Managers on an annual basis. An initial grant was made following completion of the
merger in March 2001. The measurement period for the options granted in March 2001 commenced on 1st January 2001. The measurement
periods for options granted in November 2001 and 2002, and December 2003 and 2004 commenced on 1st January 2002, 2003, 2004 and
2005, respectively. The Directors hold these options under the various share option plans referred to in Note 37 to the ffinancial statements,
Employee share schemes. The measurement period for options granted in February 2006 commenced on 1st January 2006. None of the other
Directors had an interest in any option over the companys shares.
Following the merger, each of the Directors above elected to exchange their outstanding options in the legacy share option plans for options
over GSK shares. These Directors, and all other participants in those legacy schemes who made such an election, will receive an additional
benefit of a cash sum equal to 10% of the grant price of the original option. This additional benefit will be given when the new option is
exercised or lapses.
Prior to 2003, only those share options granted to the then Executive Directors were subject to a performance condition. In order for the options
to vest in full, business performance EPS growth, excluding currency and exceptional items, had on average to be at least three percentage
points per annum more than the increase in the UK Retail Prices Index over any three-year performance period.
For share options granted in 2003 and 2004 vesting increases on a straight-line basis for EPS performance between the hurdles set out in the
following table.
Annualised growth in EPS
Percentage of award vesting
> RPI + 5%
RPI + 4%
RPI + 3%
< RPI + 3%
100%
75%
50%
0%
In respect of the 2003 grant, if the performance condition is not met after the three-year measurement period, the performance will be
measured again over the four financial years following the date of grant of the options. If the performance condition is not met at the end of
four years, the option will lapse.
The options granted to the Executive Directors in 2004 were subject to the same performance condition as set in 2003, but to the extent
that the performance conditions have not been met at the end of the three-year performance period, the option will lapse with no retesting
being permitted.
2004
Gain
Gain
Date
Number
Dr JP Garnier
14.02.05
79,054
$22.07
$47.74
$2,029,561 $6,621,049
Dr T Yamada
06.12.05
07.12.05
16,400
58,468
$22.36
$22.36
$50.52
$50.10
$461,824
$1,622,107
Mr J Heslop
23.12.05
1,031
9.16
14.66
5,665
Options exercised
Market
price
2005
Grant
price
At the average exchange rate for the year, the above gain made by Dr Garnier amounted to 1,115,143. An EOI benefit of $174,472 (95,864)
was paid to Dr Garnier on exercise of these options. This benefit has been included in the table on page 45.
At the average rate for the year, the above gain made by Dr Yamada amounted to 1,145,017. An EOI benefit of $167,405 (91,981) was
paid to Dr Yamada on the exercise of these options. This benefit has been included in the table on page 45.
Mr Coombe did not exercise any share options during 2005 or 2004.
The highest and lowest closing prices during the year ended 31st December 2005 for GlaxoSmithKline shares were 15.44 and 11.75,
respectively. The highest and lowest prices for GlaxoSmithKline ADSs during the year ended 31st December 2005 were $53.53 and $44.48,
respectively. The market price for a GlaxoSmithKline share on 31st December 2005 was 14.69 (31st December 2004 12.22) and for a
GlaxoSmithKline ADS was $50.48 (31st December 2004 $47.39). The prices on 24th February 2006 were 14.61 per GlaxoSmithKline share
and $51.10 per GlaxoSmithKline ADS.
50
Remuneration Report
continued
Incentive plans
Performance Share Plan awards
Performance period
Unvested
at 31.12.04
Vested &
deferred at
31.12.04
Market
price on
date of
grant
Number
70,000
70,000
205,990
200,000
35,515
$51.95
$37.25
$44.57
$43.73
51.02
35,000
01.01.01 31.12.03
01.01.02 31.12.04
01.01.03 31.12.05
01.01.04 31.12.06
01.01.05 31.12.07
01.01.06 31.10.08
Lapsed
Additional
ADS by
dividends
reinvested
$46.67 $1,633,450 35,000
1,160
6,773
4,881
Vested & exercised

Market
price
Gain
Vested &
Unvested deferred at
at 31.12.05
31.12.05
70,000
212,763
204,881
Number
granted
in 2006
36,675
220,000
The value of awards deferred by Dr Garnier at vesting was $1,496,608.
Dr T Yamada ADSs
Unvested
at 31.12.04
Vested &
deferred at
31.12.04
Market
price on
date of
grant
Number
20,000
20,000
61,797
60,000
$51.95
$37.25
$44.57
$43.73
10,000
Performance period
Unvested
at 1.4.05
Vested &
deferred at
31.12.04
Market
price on
date of
grant
Number
01.01.02 31.12.04
01.01.03 31.12.05
01.01.04 31.12.06
01.01.05 31.12.07
01.01.06 31.12.08
5,000
5,000
5,000
15,500
18.15
11.79
12.70
11.63
14.68
2,500
Unvested
at 31.12.04
Vested &
deferred at
31.12.04
Market
price on
date of
grant
Number
40,000
40,000
123,622
18.15
11.79
12.70
20,000
Performance period
01.01.02 31.12.04
01.01.03 31.12.05
01.01.04 31.12.06
01.01.05 31.12.07
Mr J Heslop Shares
Mr J Coombe Shares
Performance period
01.01.02 31.12.04
01.01.03 31.12.05
01.01.04 31.12.06
Lapsed
Additional
ADS by
dividends
reinvested
$466,700 10,000
2,032
1,464
Vested & exercised

Market
price
Gain
$46.67
Lapsed
Additional
shares by
dividends
reinvested
2,500
385
Lapsed
Additional
shares by
dividends
reinvested
247,000 20,000
40,000
1,036
Vested & exercised

Market
price
Gain
12.35
30,875
Vested & exercised

Market
price
Gain
12.35
Vested &
at 31.12.05
31.12.05
20,000
63,829
61,464
Number
granted
in 2006
Vested &
at 31.12.05
31.12.05
Number
granted
in 2006
5,000
5,000
15,885
100,000
Vested &
at 31.3.05
31.12.05
40,000
84,658
Number
granted
in 2006
On 1st April 2005, the total number of Performance Share Plans (PSP) awards granted to Mr Coombe for the performance period 1st January
2004 to 31st December 2006 was pro-rated to reflect his retirement before the end of the performance period. The PSP awards for the
performance period 1st January 2006 to 31st December 2008 were made on 21st February 2006 when the market price was 14.68 per share
and $51.02 per ADS. Dr Garnier was awarded 220,000 ADSs, and Mr Heslop 100,000 shares. All are unvested.
At the average exchange rate for the year, the above gains by Dr Garnier and Dr Yamada amounted to 897,500 and 256,429, respectively.
The PSP is a medium-term incentive scheme introduced during 2001. The PSP replaces the LTI Plan and the Mid-Term Incentive Plan operated,
respectively, by Glaxo Wellcome and SmithKline Beecham.
Under the terms of the PSP the number of shares actually vesting is determined following the end of the relevant three-year measurement period
and is dependent on GSKs performance during that period as described on pages 40 and 41. The share awards were previously granted annually
in November or December, but from 2005 they are granted in February of the following year.
The measurement period commences on the 1st January, in the year in which they are granted, ending after three years on 31st December. The
three-year measurement period for the awards with a performance period commencing 1st January 2003 ended on 31st December 2005. Based
on the performance of GSK during that period, 50% of the award vested in February 2006. For awards with a performance period commencing
on 1st January 2005 and subsequent awards, dividends are reinvested on the PSPs awarded to members of the CET. Dividends are reinvested in
the quarter in which payment is made. Under the terms of the PSP, US participants may defer receipt of all or part of their vested awards.
Prior to the performance period beginning 1st January 2004, awards were in two parts: half can be earned by reference to GSKs TSR
performance compared to the FTSE 100, of which the company is a constituent, and the other half of the award will be earned if the companys
business performance EPS growth, excluding currency and exceptional items, is on average at least three percentage points per year more than
the increase in the UK Retail Prices Index over the three-year performance period. For these awards, if GSK is ranked in the top 20 of the FTSE
100 based on TSR performance, then all of the shares in this part of the award will vest. For the 50th position in the FTSE 100, 40% of the
shares will vest. If GSK is ranked below the 50th position, none of the shares subject to this part of the award will vest. Between the 20th and
50th positions, vesting will occur on a sliding scale.
51
Dr JP Garnier ADSs
Remuneration Report
continued
The following vesting table applies to the awards with performance periods from 1st January 2004 to 31st December 2006 and 1st January
2005 to 31st December 2007. It also applies to the awards made on 21st February 2006.
TSR rank with 14 companies & GlaxoSmithKline*
* The performance comparator group for these awards comprised 14 other companies
and GlaxoSmithKline. Both Aventis and Sanofi-Synthelabo were in the comparator
group prior to their merger to form Sanofi-Aventis. For the purposes of calculating
TSR over the performance period for the awards granted in December 2003, the
starting price of the shares of the two individual companies will be compared to the
price of the merged company at the end of the performance period, adjusted by the
merger ratio. Dividends will be treated as having been reinvested during the
performance period.
Percentage of award vesting**
1
2
3
4
5
6
7
Median
Below median
100%
100%
90%
80%
70%
60%
50%
35%
0%
** TSR is measured on a pro rata basis. Where GlaxoSmithKlines performance falls

between two of the comparators, the level of vesting will be determined by the actual
relative level of TSR rather than simple ranking.
Mid-Term Incentive Plan ADSs

Dr JP Garnier
Vested and
deferred
participations
at 31.12.04
Additional ADS
by dividends
reinvested
in 2005
Vested and
deferred
participations
at 31.12.05
163,138
5,326
168,464
The Mid-Term Incentive Plan (MTIP) was a share award scheme operated by SmithKline Beecham. The plan closed to new entrants upon
completion of the merger and no further participations have been granted.
Where a final award of ADSs is made, receipt of the award may be deferred by a Director. Dr Garnier deferred receipt of the full amounts
vested in 1999, 2000, 2001, 2002 and 2003. The deferred awards, together with any additional ADSs subsequently received through dividend
reinvestment, are not included in the Directors interests table on page 48 since they are retained in the MTIP until paid out.
Stock Appreciation Rights (SARs) ADSs
Dr L Shapiro
Options exercised
Dr L Shapiro
At 31.12.04
At 31.12.05
Average
grant price
1,487
872
$57.25
Date
Number
Grant price
Market price
2005
Gain
2004
Gain
21.12.05
615
$40.54
$50.91
$6,380
All SARs held by Dr Shapiro had a grant price above the market price of a GlaxoSmithKline ADS at 31st December 2005.
Dr Shapiro is a member of GlaxoSmithKlines Scientific Advisory Board (SAB). Dr Shapiro was a member of SmithKline Beechams SAB from
1993 until the completion of the merger with Glaxo Wellcome. Along with other members of the SAB, she received annual grants of SmithKline
Beecham SARs which, in general, vested three years from the date of grant and will expire 10 years from the date of grant. Grants of SARs to
SAB members ceased in 1999.
SARs entitle the holder to a cash sum at a future date based on share price growth between the date of grant and the date of exercise.
Full provision is made in the financial statements for accrued gains on SARs from the date of grant. In connection with the merger, all previously
granted SARs became immediately exercisable.
52
Remuneration Report
continued
Pensions
The accrued annual pension benefits and transfer values for Executive Directors on retirement are set out below.

Dr JP Garnier
Mr J Heslop
Dr T Yamada
Former Executive Directors
Mr J Coombe
Personal
Change in contributions
accrued
made to the
benefit scheme during
over year
the year
000
000
Accrued
benefit at
31.12.04 (b)
000
Accrued
benefit at
31.12.05
000
$1,040
44
$140
$1,093
75
$168
$53
31
$28
345
337
(8)
Change in
accrued Transfer value
benefit over
of change
year net
in accrued
of inflation
benefit (b)
000
000
Transfer
value at
31.12.04 (a)
000
Transfer
value
at 31.12.05
000
Change
in transfer
value (b)
000
$11,638
642
$1,526
$13,240
1,260
$1,985
$1,602
609
$459
$17
30
$24
$1,602
523
$459
7,666
7,955
289
(19)
(351)
a) Dr Yamadas transfer value at 31st December 2004 has increased by $262,469 from that previously disclosed as the result of an adjustment to his employment
contract in 2004. Dr Yamadas accrued benefit at 31st December 2004 has decreased by $25,066 reflecting an adjustment to his retirement age.
b) The change in transfer value and the transfer value of change in accrued benefit are shown net of contributions made by the individual.
Dr Garnier and Dr Yamada are members of the all employee US cash balance pension plan, under which GlaxoSmithKline makes annual
contributions calculated as a percentage of the employees base salary and bonus. The fund increases at an interest rate set annually in advance
based on the 30-year treasury bond rate to provide a cash sum at retirement. This cash sum is used to purchase a pension at retirement based
on the annuity rates applicable at that time. Neither has entitlement to a spouses pension or to pension increases, other than by reducing their
own initial pension.
The normal retirement age under this plan is 65 years of age. Dr Garniers pension arrangements have been brought into line with the terms of
his service agreement and the assumed retirement age reduced to 60. Similarly Dr Yamadas assumed retirement age had been reduced to 62.
The transfer value, or cash sum, of Dr Garniers plan has increased by $1,602,236 over the year as a result of phased transfers from a previous
scheme, the further accumulation of interest and contributions paid by the company.
The transfer value, or cash sum, of Dr Yamadas plan has increased by $458,737 over the year as a result of the further accumulation of interest
and contributions paid by the company.
Dr Garnier and Dr Yamada are also members of the US Retirement Savings Plan, a savings scheme open to all US employees and the Executive
Supplemental Savings Plan, a savings scheme open to executives to restore US government limits imposed on the Retirement Savings Plan.
Contributions to both plans are invested in a range of funds and the value of the accumulated funds are paid at retirement. During 2005
contributions of 84,710 ($154,172) were paid into these two schemes by the company in respect of Dr Garnier, of which 2,308 ($4,200)
was invested in GSK shares in a stock ownership account. In respect of Dr Yamada, contributions of 40,483 ($73,679) were paid into the
scheme of which 2,308 ($4,200) was invested in GSK shares in a stock ownership account. The shares held in these accounts are included
within the Directors interests tables on page 48.
Mr Heslops transfer value has been calculated on the basis of actuarial advice in accordance with Actuarial Guidance Note GN11. The transfer
value represents the present value of future payments to be made under the pension plan. Mr Heslops annual accrued benefit has increased
by 31,329 (29,900 excluding the effects of inflation), and the transfer value less personal contributions has increased by 608,999 over the
year. The increase in Mr Heslops pensionable salary of 127,380 is the primary reason for the increase in transfer value.
Mr Coombes transfer value has been calculated on the basis of actuarial advice in accordance with Actuarial Guidance Note GN11. The
transfer value represents the present value of future payments to be made under the pension plan. Mr Coombes transfer value increased by
289,211 but his accrued benefit fell by 8,201. This decline is due to Mr Coombe opting to receive a lumpsum on retirement.
Mr Coombe waived his 2005 bonus of 106,870. The company made a contribution to the pension plan in 2005 of 1,141,164 to enhance
his pension benefits, being his 2005 bonus, his special deferred bonus of 383,924 and his 2004 bonus of 650,370.
53
The regulations require disclosure of the accrued benefit at the end of the year, the change in accrued benefit over the year, the transfer value
at both the beginning and end of the year, and the change in the transfer value over the year. The Listing Rules require additional disclosure
of the change in accrued benefit net of inflation and the transfer value of this change. Pensions for the Executive Directors have been disclosed
in the currency in which the pension is payable.
Remuneration Report
continued
Directors and Senior Management

For US reporting purposes, it is necessary to provide information on compensation and interests of Directors and Senior Management as a group
(the group). For the purposes of this disclosure, the group is defined as the Directors, members of the CET and the Company Secretary. In
respect of the financial year 2005, the total compensation paid to members of the group for the periods during which they served in that
capacity was 17,538,674, the aggregate increase in accrued pension benefits, net of inflation, was 78,814 and the aggregate payment to
defined contribution schemes was 374,156. During 2005, members of the group were granted 4,080 options under the Sharesave scheme,
and were awarded 14,542 shares and 31,290 ADSs through the reinvestment of dividends in the Performance Share Plan. At 24th February
2006, the then-current members of the group (comprising 24 persons) owned 495,389 shares and 474,221 ADSs, constituting less than 1%
of the issued share capital of the company. The group also held, at that date: options to purchase 5,372,577 shares and 8,145,814 ADSs;
910,359 shares and 1,557,146 ADSs awarded under the Performance Share Plan, including those shares and ADSs that are vested and deferred;
8,103 shares and 232,732 ADSs under the legacy SmithKline Beecham Mid-Term Incentive Plan, including those shares and ADSs that are vested
and deferred; 872 ADSs awarded under the legacy SmithKline Beecham Stock Appreciation Rights and 6,320 shares awarded under the
Restricted Share Plan. These holdings were issued under the various executive share option plans described in Note 37 to the fi
f nancial statements,
Employee share schemes.

Except as described in Note 33 to the fi
f nancial statements, Related party transactions, during or at the end of the financial year no Director
or connected person had any material interest in any contract of significance in relation to the Groups business with a Group company.
The Directors Remuneration Report has been approved by the Board of Directors and signed on its behalf by

Chairman
1st March 2006
54
Financial trends and ratios
56
2005 Year results for the year to 31st December 2005

compared to the year to 31st December 2004
57
Financial position and resources at 31st December 2005
66
Outlook and Risk Factors
71
2004 Year results for the year to 31st December 2004

compared to the year to 31st December 2003
75
The reconciliation to US accounting principles is set out in Note 38 to

the financial statements.
Accounting presentation
With effect from 1st January 2005, GSK has moved to reporting its
financial results in accordance with International Financial Reporting
Standards (IFRS) as required by a European Union Regulation issued
in 2002. This report is prepared under IFRS, as adopted for use in the
European Union. All comparative figures are presented on this basis,
except that GSK has taken advantage of an exemption which permits
financial instruments to be accounted for and presented on a UK
GAAP basis in 2004 and 2003 and only in accordance with IAS 32 and
IAS 39 from 1st January 2005. Full details of the major differences
from UK GAAP as they apply to GSK are given in Note 38 to the
financial statements, IFRS transition. Information prepared under IFRS
is not directly comparable with that prepared under UK GAAP.
Data for market share and market growth rates are GSK estimates
based on the most recent data from independent external sources,
and where appropriate, are valued in sterling at relevant exchange
rates. Figures quoted for product market share reflect sales by GSK
and licensees.
In order to illustrate underlying performance, it is the Groups practice
to discuss its results in terms of constant exchange rate (CER) growth.
This represents growth calculated as if the exchange rates used to
determine the results of overseas companies in sterling had remained
unchanged from those used in the previous year. CER% represents
growth at constant exchange rates. % represents growth at actual
exchange rates.
Annual Report on Form 20-F

For the purpose of US reporting requirements applicable to first-time
adopters of IFRS, GSK hereby incorporates by reference from its
Annual Report on Form 20-F for 2004, the Five year record of selected
financial information on pages 160 to 162 thereof, the discussion of
the 2004 Year on pages 61 to 70 in the Operating and financial review
and prospects section thereof and the Financial statements and
supporting notes on pages 87 to 152 thereof.
55
The Operating and financial review and prospects discusses the

operating and financial performance, the financial outlook and the
financial resources of the Group. The results for each year, which have
been prepared under IFRS, as adopted for use in the European Union,
are compared primarily with the results for the preceding year under
the following headings:
2005
Growth
2004
CER%
CER%
Turnover Pharmaceuticals
Consumer Healthcare
18,661
2,999
8
2
9
4
17,100
2,886
1
3
(6)
(2)
18,114
2,956
Total
21,660
19,986
(5)
21,070
Cost of sales
Selling, general and administration
Research and development
Other operating income
(4,764)
(7,250)
(3,136)
364
9
1
8
(4,360)
(7,201)
(2,904)
235
(5)
8
(5)
(9)
1
(4,577)
(7,888)
(2,865)
310
Operating profit
6,874
16
19
5,756
(5)
6,050

6,732
4,816
13
17
16
20
5,779
4,022
9
4
(3)
(7)
5,954
4,308

127
4,689
Earnings per share (pence)

Diluted earnings per share (pence)
82.6p
82.0p
Growth
2003
114
3,908
18
21
68.1p
68.0p
107
4,201
6
(6)
72.3p
72.1p

Pharmaceuticals
Consumer Healthcare
3,030
106
2,797
107
2,770
95
Total
3,136
2,904
2,865
194
36 times
186
32 times
153
40 times
28.5%
30.4%
27.7%
1,237
16%
1,984
33%
1,648
29%
Net finance cost cover

Net finance costs
Cover
Net finance cost cover is profit before tax plus net finance costs, divided by net finance costs.
Tax rate
Borrowings
Net debt
Gearing
The gearing ratio is calculated as net debt as a percentage of total equity.
Exchange rates
The Group, as a multinational business, operates in many countries and earns revenues and incurs costs in many currencies. Its results are reported
in sterling and are affected by movements in exchange rates between sterling and other currencies.
Average exchange rates prevailing during the period are used to translate the results and cash flows of overseas subsidiary and associated
undertakings and joint ventures into sterling. Period end rates are used to translate the net assets of those undertakings. The currencies which
most influence these translations are the US dollar, the Euro and the Japanese Yen.
56
World economy
World market pharmaceuticals
GDP growth picked up in the first part of the year, but the impact of
higher oil prices later in the year saw leading indicators turn
downward and business confidence weaken in most major countries.
Manufacturing and trade strengthened during the year after an initial
dip. Modest global expansion continued to be led by the USA and
China, where momentum was maintained in contrast to most other
regions excluding Japan and India. However, US GDP growth slowed
in the fourth quarter of 2005 to an annual rate of 3.5% compared
with 4.2% in 2004, reflecting a slow down in consumer spending and
in federal government spending. During 2005, US interest rates
increased through a series of rises from 2.25% to 4.25%. There are
mixed views on the outlook for the US economy in 2006.
Global pharmaceutical sales increased by 7% in 2005 to 302 billion.

World market by
Value
% of
Growth
geographic region
bn
total
%
GDP growth in China again exceeded expectations at 9.9% and was

also robust in India, where continued expansion in services such as
information technology remained strong. Global trade arrangements,
including those with China, were again in the spotlight. There were
agreements between the EU and China and between the USA and
China on textile imports in 2005, but the World Trade Organisation
ministerial talks in Hong Kong at the end of the year made only
modest progress towards agreement on the reduction of trade
barriers.
USA
Europe
Germany
France
UK
Italy
Japan
Asia Pacific
Latin America
Middle East, Africa
Canada
132.0
86.8
16.4
15.9
10.5
9.9
32.5
20.5
13.7
9.8
7.0
44
29
5
5
3
3
11
7
4
3
2
3
8
8
9
3
4
13
15
17
14
Total
302.3
100
Growth in the US market has slowed to 3% but it still represents 44%

of the global prescription pharmaceutical market compared with 30%
a decade ago.
At 30th September 2005, GSK held second position in the world
pharmaceutical market with a market share of 6.3%, behind Pfizer
with a market share of 8.9%. GSK had eight of the worlds top 60
pharmaceutical products. These were Avandia, Flixonase,
Imigran/Imitrex, Lamictal, Seretide/Advair, Seroxat/Paxil, Wellbutrin
and Zofran.
The Japanese economy expanded strongly, particularly in the fourth

quarter, driven by a recovery in domestic demand, underpinned by a
strengthening labour market which saw full-time employment expand
for the first time in seven years. Both business confidence and exports
grew during the year. Part of this confidence stemmed from the
continued reforms in the banking sector. GDP growth for the year was
5.5%, with a similar rise forecast for 2006, and the Nikkei share index
rose to a four-year high on the strength of better-than-expected GDP
data.
Oil prices and higher commodity prices slowed growth in the 12
Eurozone nations and economic forecasts for the zone were
downgraded during the year. With increased concerns about rising
inflation, the European Central Bank raised interest rates by 0.25%
to 2.25%, the first change in rates since June 2003. Weak domestic
demand and the Euros lack of resilience to external events were
features of the Eurozone in 2005. In the UK, GDP growth of 1.8%
was recorded, with a rate of around 2% predicted for 2006. The Bank
of England cut interest rates in the middle of the year to 4.5% on the
grounds that economic growth was subdued, but predicted growth
would pick up in 2006, reflecting a recovery in domestic demand and
foreign trade.
World market
top five therapeutic classes
Value
bn
% of
total
CER%
Growth
%
Cardiovascular
Alimentary tract and metabolic
Anti-infectives (bacterial,
viral and fungal) excluding
vaccines
Respiratory
50.7
49.7
36.6
17
16
12
7
6
6
6
4
5
32.2
20.7
11
7
7
8
5
7
(Note: data based on 12 months to 30th September 2005.)
Pharmaceutical turnover
All growth rates included in the review of turnover are at constant
exchange rates (CER) unless otherwise stated. The sterling growth
rates may be found in the tables of pharmaceutical turnover by
therapeutic area on page 59 and by geographic region on page 60.
Exchange
Total pharmaceutical turnover in 2005 was 18,661 million compared

with 17,100 million in 2004, an increase of 8% CER. In sterling terms
turnover increased 9%, principally due to the strength of the Euro and
other International currencies. Within the Groups portfolio, turnover
of new products first launched in a major market within the last five
years accounted for 24% of total turnover and grew by 30% to
4,446 million. Turnover of the more established, franchise products
amounted to 10,965 million, representing 59% of total turnover,
and increased 4% compared with last year. Turnover of older
products, now less actively promoted, was 3,250 million, a decline
of 1%, representing 17% of total turnover.
The currencies that most influence the Groups results are the US
dollar, the Euro and the Japanese Yen.
In 2005, the dollar strengthened by over 10% against the pound,
rising to $1.72 at the year-end following two years of weakness.
Both the Euro and Japanese Yen year-end rates weakened against
the pound by just over 3%.
57
2005 Year
2005 Year
continued
Pharmaceutical turnover by therapeutic area
Total Wellbutrin turnover fell 2% to 739 million. Wellbutrin IR and

SR sales fell 68% to 92 million due to generic competition, but this
was largely offset by the very strong performance of Wellbutrin XL (up
38% to 647 million).
GSKs ability to continue to deliver pharmaceutical turnover growth,

is primarily due to an exceptionally broad product portfolio of fastgrowing, high-value products. Sales of GSKs largest product,
Seretide/Advair, were up 22% to 3.0 billion and continued to gain
market share across all regions. Market share by value in the antiasthma and COPD therapy class was 27% in Europe and 33% in the
USA, an increase of 2 percentage points in both cases compared with
2004. Sales of diabetes treatments were also strong, with
Avandia/Avandamet up 18% to 1.3 billion. GSK launched Avandia
for the treatment of type 2 diabetes in 1999 and a combination
product, Avandamet, for blood sugar control in 2002. The product
group was expanded further in February 2006 with the launch in the
USA of a fixed-dose combination treatment, Avandaryl, which
combines Avandia with a sulfonylurea. EU approval is expected in Q2
2006. In 2005, Avandia/Avandamet achieved a market share by value
in oral anti-diabetics of 14% in Europe and 35% in the USA, up 3 and
6 percentage points, respectively.
Market share by value

Seretide/Advair
40%
31
30%
25
The strong growth of GSKs epilepsy and bi-polar disorder treatment

Lamictal continued, with sales up 24% to 849 million, driven by the
indication for the maintenance treatment of bi-polar disorder.
Requip sales rose 34% to 156 million. By Q1 2006, weekly new
prescriptions for the product have quadrupled in the USA since it was
launched for restless legs syndrome (RLS) in Q2 2005. In the EU, final
approval of Requip (Adartrel) for RLS is expected during Q1 2006.
Anti-virals
Global HIV product sales grew 5% to 1.6 billion, with sales from
new products Epzicom/Kivexa and Lexiva (together more than
doubling to 226 million) offsetting the performance of Trizivir (down
6% to 303 million) and Epivir (down 12% to 261 million). Sales of
the herpes treatment Valtrex grew 21% to 695 million. Performance
is being driven by the USA (up 26% to 470 million) where the
product is the clear market leader in treatments for genital herpes.
Avandia/Avandamet
Anti-bacterials
Anti-bacterial sales declined 3% worldwide. In the USA the decline
was 27% reflecting increased generic competition.
35
33
29
27
20%
11
Metabolic
The diabetes treatments Avandia/Avandamet continued to perform
very strongly, with overall sales of 1.3 billion, up 18%. In the USA,
sales grew 14% to 977 million. Avandia/Avandamet are also
establishing strong positions in Europe, with sales rising 52% to 157
million, helped by the launch of Avandamet. Sales in International
markets rose 13% to 195 million. Two major outcome studies
involving Avandia are due to report by the end of 2006. ADOPT
investigates first line use of Avandia in type 2 diabetes and DREAM
the earlier use of Avandia to delay or prevent disease progression.
14
10%
Europe
September 2004
USA
Europe
USA
September 2005
Other fast growing products were Lamictal for epilepsy/bipolar

disorder, up 24% (0.8 billion), Valtrex for herpes, up 21% (0.7
billion), Coreg for heart disease, up 32% (0.6 billion) and vaccines,
up 15% (1.4 billion).
Boniva/Bonviva, a new once-monthly oral bisphosphonate for the

treatment of osteoporosis, which was developed with Roche, had a
strong launch in the USA and in February 2006 had a 10% share of
new prescriptions for oral bisphosphonates. Boniva injection, the firstever quarterly treatment for osteoporosis, was approved in the USA
in January 2006 and received a positive opinion from the CHMP in
Europe on 27th January 2006.
In addition, in 2005 there has been a rapid uptake of a number of high

potential products such as Requip, for restless legs syndrome (sales up
34% to 156 million), Avodart for benign prostatic hyperplasia (sales
doubled to 129 million) and Boniva/Bonviva for the treatment of
osteoporosis, which was launched in 2005 and captured a 10% share
of new prescriptions for oral bisphosphonates in the US market.
Respiratory
GSK continues to be the global leader in respiratory pharmaceuticals
with sales of its three key products, Seretide/Advair, Flixotide/Flovent
and Serevent, amounting to 4.0 billion, up 15%. Seretide/Advair
sales rose 26% to 1.7 billion in the USA. Sales were also strong in
both European and International markets, which were up 16% to 1
billion and 0.3 billion, respectively.
Vaccines
The vaccines business performed well, with total sales rising 15% to
1.4 billion, led by Infanrix. Vaccine sales were particularly strong in
the USA, where turnover rose 26% to 338 million, helped by the
launch of two new products, Fluarix and Boostrix.
In July, GSK acquired Corixa Corporation for 150 million and in
December, completed the acquisition of ID Biomedical Corporation for
0.9 billion. Approval of IDBs Fluviral flu vaccine is expected in time
for the 2006/07 flu season.

CNS sales declined 8% to 3.2 billion. Sales declined in the USA and
Europe, with a small gain in International. Total Paxil sales fell 42% to
615 million, due to generic competition and the interruption in
supply to Paxil CR during the year. See Product supply on page 61.
Partially mitigating this decline was the strong performance of Paxil
in Japan, up 17% to 197 million.
Also in December, GSK submitted a mock-up dossier to the EMEA for

accelerated approval of a potential pandemic influenza vaccine. GSK
expects to begin clinical trials in the coming weeks on its H5N1 prototype
pandemic vaccine using two different adjuvants: alum and a newly
developed adjuvant. The Group is in discussions with governments
around the world on plans to prime populations and stockpile the
vaccine. GSK expects to complete its filing in Europe in 2006.
58
2005 Year
continued
Pharmaceutical turnover by therapeutic area 2005

Total
Growth
CER% %
Respiratory
Seretide/Advair
Flixotide/Flovent
Serevent
Flixonase/Flonase
27
5,054
3,003
638
330
656
4,394
2,441
618
349
578
14
22
2
(7)
13
15
23
3
(5)
13
2,580
1,687
262
104
506
17
26
4
(20)
12
18
27
4
(19)
12
1,660
1,033
188
160
60
Central Nervous System

Seroxat/Paxil
Paxil IR
Paxil CR
Wellbutrin
Wellbutrin IR, SR
Wellbutrin XL
Imigran/Imitrex
Lamictal
Requip
17
3,219
615
488
127
739
92
647
697
849
156
3,462
1,063
667
396
751
284
467
682
677
116
(8)
(42)
(27)
(68)
(2)
(68)
38
1
24
34
(7)
(42)
(27)
(68)
(2)
(68)
39
2
25
34
2,051
133
18
115
723
80
643
504
568
80
(10)
(75)
(87)
(70)
(2)
(70)
37
2
36
50
(10)
(74)
(87)
(70)
(2)
(70)
38
2
37
51
704
187
187
2
2
144
226
68
(7)
(6)
(26) (25)
(26) (25)
42 100
42 100
1
1
3
4
21
21
464
2
5
295
1
283
(1)
(1)
12
40
50
14 (14)
(7)
10 (35) (23)
4 >100 100
49
(2)
2
55
15
22
8
22
14
Anti-virals
HIV
Combivir
Trizivir
Epivir
Ziagen
Retrovir
Agenerase, Lexiva
Epzicom/Kivexa
Herpes
Valtrex
Zovirax
Zeffix
14
2,598
1,554
583
303
261
136
41
112
118
826
695
131
145
2,359
9
10
1,462
5
6
570
1
2
322
(6)
(6)
294 (12) (11)
155 (14) (12)
43
(6)
(5)
63
77
78
1 >100 >100
718
14
15
571
21
22
147 (11) (11)
130
9
12
1,285
766
283
166
93
55
14
70
85
476
470
6
12
10
2
1
(7)
(33)
(26)
(17)
50
24
26
(32)
11
10
3
1
(6)
(33)
(25)
(18)
52
25
27
(45)
9
773
6
7
607
8
9
227
1
123
(5)
(5)
122
4
6
54
(8) (10)
16
(6)
36 >100 >100
29 >100 >100
139
1
98
9
9
41 (16) (15)
21
(8)
(5)
540
12
15
181
12
15
73
8
12
14
(8)
(7)
46
12
15
27
11
23
11
12
10
6
46
20
4 >100 >100
211
4
6
127
12
13
84
(6)
(5)
112
13
15
Anti-bacterials
Augmentin
Augmentin IR
Augmentin ES, XR
Zinnat/Ceftin
1,519
666
552
114
197
1,547
708
533
175
205
(2)
(6)
4
(35)
(4)
261
139
40
99
10
(27)
(38)
(34)
(40)
2
(27)
(38)
(32)
(40)
11
718
316
305
11
112
4
6
4
83
(7)
540
211
207
4
75
5
11
11
(19)
(4)
7
13
14
(20)
(1)
Metabolic
Avandia
Avandamet
Bonviva/Boniva
1,495
1,154
175
18
1,251
18
20
892
27
29
222 (22) (21)
>100 >100
995
864
113
17
16
31
(43)
17
32
(43)
190
39
43
112
20
23
45 >100 >100
1 >100 >100
310
178
17
12
15
2
17
22
13
Vaccines
Hepatitis
Infanrix, Pediarix
1,389
444
431
1,194
405
356
15
8
19
16
10
21
338
137
145
26
1
13
26
2
12
592
224
202
12
11
24
14
12
25
459
83
84
10
13
20
13
17
27
Oncology and emesis

Zofran
Hycamtin
1,016
837
99
934
763
99
8
9
(1)
9
10
761
639
66
12
12
2
12
13
3
164
124
27
(4)
(5)
(6)
(4)
(5)
(7)
91
74
6
1
3
(6)
7
9
Cardiovascular and
urogenital
Coreg
Levitra
Avodart
Arixtra
Fraxiparine
Vesicare
7
1,331
573
40
129
24
211
13
932
41
43
432
32
33
49 (19) (18)
64 100 >100
6 >100 >100
56 >100 >100
Other
Zantac
6
100
1,040
244
1,027
273
(12)
1
(11)
69
58
18,661 17,100
9,106
(22)
(19)
(22)
(17)
8
16
(3)
(3)
(1)
3
5
3
97
(9)
9
17
(1)
(1)
2
2005
m
International
Growth
CER% %
2004
m
766
36
36
568
33
34
35
79
75
65
90
91
15 >100 >100
13
2005
m
Europe
Growth
CER% %
2005
m
(3)
(7)
2
(35)
(6)
2005
m
USA
Growth
CER% %
% of
total
814
283
188
66
90
13
16
3
12
27
17
24
6
14
30
415
57
59
4 (78) (81)
55 >100 >100
8 >100 >100
179 >100 >100
150
32
39
5 (30) (29)
1 (94) (88)
9 >100 >100
1 >100 >100
32 >100 >100
321
64
650
122
3
(6)
6
(7)
4,018
12
5,537
(2)
(15)
(1)
(11)
CER% represents growth at constant exchange rates. % represents growth at actual exchange rates. Turnover by quarter is given in the Financial record on pages 172 to 177.
59
Therapeutic area/
major products
2005 Year
continued
Oncology and emesis

Sales of Zofran grew 9% to 837 million, driven by the US market,
up 12% to 639 million.
Pharmaceutical turnover for Europe region in 2005 on a

turnover created basis
2005
Region/
major markets

Sales of Coreg for heart disease grew 32% to 573 million.
Europe
5,537
France
1,007
UK
766
Italy
666
Germany
555
Spain
590
Poland
208
Other Europe 1,745
Avodart for benign prostatic hyperplasia (enlarged prostate) had a

very strong year, with sales doubling to 129 million. By January 2006
the product accounted for 42% of new prescriptions in the US
5-Alpha Reductase Inhibitor market.
Other therapeutic areas

Sales of Zantac fell 12% to 244 million, with declines in all regions.
Regional analysis
% of
total
2005
m
2004
m
CER%
USA
49
9,106
8,425
Europe
France
UK
Italy
Germany
Spain
Poland
Other Europe
30
5,537
1,007
766
666
555
590
208
1,745
5,084
982
735
611
482
560
148
1,566
8
2
4
8
14
5
24
10
9
3
4
9
15
5
41
11
International
Asia Pacific
Japan
Middle East, Africa
Latin America
Canada
21
4,018
1,324
854
746
651
443
3,591
1,161
769
669
581
411
9
10
13
9
7
12
14
11
12
12
8
18,661
17,100
100
Created
m
5,537
(47)
960
92
858
(14)
652
57
612
(15)
575
208
(73) 1,672
2004
Invoiced Adjustment
m
m
5,084
982
735
611
482
560
148
1,566
Created
m
5,084
(32)
950
95
830
(23)
588
54
536
(15)
545
148
(79) 1,487
These adjustments are GSKs estimates based on the most recent data
from independent external sources, valued in sterling at relevant
exchange rates. Management believes that this turnover created basis
of reporting turnover by market provides a better reflection of the
performance of the businesses in each market within Europe.
Pharmaceutical turnover by geographic region in 2005 on

an invoiced basis
The turnover reported in the table below represents sales invoiced by
GSKs local entity to its customers in the local market plus copromotion income within each market.
Region/
major markets
Invoiced Adjustment
m
m
Growth*
%
The total turnover for the Europe region is unaffected by this

restatement.
Parallel trade occurs occasionally elsewhere in the world, but it is not
sufficiently material to affect significantly the turnover data by market
presented on an invoiced basis.
Pharmaceutical turnover by geographic region in 2005 on a

turnover created basis
Turnover by market within Europe has been adjusted for the effects
of parallel trade to show turnover on the basis of the country where
the product is finally consumed, not where the product was sold
by GSK.
Region/
major markets
*CER% represents growth at constant exchange rates. % represents growth

at actual exchange rates.
Individual governments determine the pricing of medicines in most

countries within Europe, which can result in wide price variations for the
same product. Parallel trade occurs when third parties exploit this price
differential by purchasing products in markets where low prices are
enforced and selling them to governments and other purchasers in
those markets where higher prices have been agreed. This parallel trade
is permitted under the single market rules in the European Union. GSK
does not derive any benefit from the profit on resale at the higher price.
As a result, management believes that within the European region,
turnover by market, on an invoiced basis as presented above, does
not properly represent the consumption of the products within each
market. GSK employees based in each market are instrumental in the
promotion of the Groups products within their market, thereby
creating a product sale and final consumption in that market. The
following table gives the adjustments made in order to restate the
turnover for markets within Europe on a turnover created basis.
% of
total
2005
m
2004
m
CER%
Growth*
%
USA
49
9,106
8,425
Europe
France
UK
Italy
Germany
Spain
Poland
Other Europe
30
5,537
960
858
652
612
575
208
1,672
5,084
950
830
588
536
545
148
1,487
3
10
13
5
24
11
9
1
3
11
14
6
41
12
International
Asia Pacific
Japan
Middle East, Africa
Latin America
Canada
21
4,018
1,324
854
746
651
443
3,591
1,161
769
669
581
411
9
10
13
9
7
12
14
11
12
12
8
100
18,661
17,100
* CER% represents growth at constant exchange rates. % represents growth

at actual exchange rates. Turnover by quarter is given in the Financial record
on pages 172 to 177.
60
2005 Year
continued
USA
The USA reported an 8% turnover growth in the year despite the
impact of generic competition to Paxil IR and Wellbutrin IR/SR.
Excluding sales of these products, turnover grew 12%. The US
business represented 49% of total pharmaceutical turnover in 2005.
Advair maintained its strong growth with sales of 1,687 million, up
26%. However, this adversely affected sales of its constituent
products, Flovent and Serevent, which collectively declined. Flonase,
indicated for the treatment of perennial rhinitis, grew by 12%.
The strong performance in Japan was driven by the sales of Paxil, up

17%, Serevent, up 29% and Anti-virals, up 10%, partially offset by
declines in Zantac, Zovirax and Tagamet.
Sales of Wellbutrin products fell 2% to 723 million. Wellbutrin IR/SR

sales fell 70% to 80 million as a result of generic competition. The
impact was partially offset, however, by the exceptionally strong
performance of Wellbutrin XL, the new once-daily product, which
achieved sales of 643 million, up 37%.
Across all markets in International, the key products driving growth

were Seretide, which grew 16% to record sales of 283 million,
Avandia/Avandamet, which grew 13% to 195 million and the
vaccines franchise, which recorded growth of 10% and achieved sales
of 459 million.
Total sales of Paxil were down 75% to 133 million as a result of

generic competition to Paxil IR, sales of which declined 87% to 18
million. Paxil CR generated sales of 115 million, down 70% due to
supply issues at the Cidra plant in Puerto Rico.
Product supply
Following FDA inspections in October 2003 and November 2004,
which identified possible deficiencies in manufacturing practices at the
Groups facility at Cidra in Puerto Rico, the FDA halted distribution of
supplies of Paxil CR and Avandamet in March 2005. This site is
engaged in tableting and packaging for a range of GSK products,
primarily for the US market including Paxil, Paxil CR, Coreg, Avandia
and Avandamet. In April 2005, the Group reached agreement with
the FDA on a Consent Decree, which provides for an independent
expert to review manufacturing processes at the site for compliance
with FDA Good Manufacturing Practice requirements. The Decree
also allows for potential future penalties, up to a maximum of $10
million a year, if GSK fails to meet its terms.
Sales in the anti-virals therapeutic area grew 10% with HIV products
up 2%. Valtrex, for herpes, grew 26% driven by patients switching
to suppression therapy.
Sales of Avandia/Avandamet increased by 14%. Anti-bacterial sales
declined 27% as a result of generic competition that began in the
third quarter of 2002. Coreg sales increased 33% to 568 million as
it continued to benefit from its wide range of indications.
Vaccines grew 26% reflecting the good performance of Pediarix and
the launches in 2005 of Boostrix and Fluarix.
In June 2005, the Group began re-supplying the US and other markets
with both Paxil CR and Avandamet. The sales of these products were
significantly impacted in 2005 by this interruption in supply. The
impact on Avandamet was mitigated by the switching of patients to
Avandia. In 2005, the Group also established a provision for the
external costs required to rectify the manufacturing issues at the plant.
For further details see Risk factors on pages 71 to 74 and Note 41 to
the financial statements, Legal proceedings.
Europe
The discussion of individual market performance in the Europe region
is on a turnover created basis.
The Europe region contributed 30% of pharmaceutical turnover and
grew 8%, which reflected strong growth in a number of countries and
the full year impact of the acquisitions of Fraxiparine and Arixtra,
which were acquired in Q3 2004. Excluding Fraxiparine and Arixtra,
growth was 5%. Markets which recorded strong growth included
Germany, Italy, Poland, Central Europe and Southern and Eastern
Europe. Government healthcare reforms, including pricing and
reimbursement restrictions, together with generic competition,
adversely affected turnover in France, the UK and Spain.
Consumer Healthcare sales

OTC medicines
Analgesics
Dermatological
Gastro-intestinal
Respiratory tract
Smoking control
Major growth drivers were Seretide, GSKs largest selling product in

Europe, with growth of 16%, the Avandia/Avandamet franchise,
which grew 52%, HIV up 8% and the vaccines franchise, up 12%.
Sales of the herpes franchise were flat compared with 2004 mainly
as a result of generic competition for Zovirax offset by patients
switching to the newer product, Valtrex.
Oral care
Seroxat sales were down 26%, reflecting generic competition in the

majority of markets in the region.
2005
m
2004
m
Growth
CER% %
1,437
362
161
249
154
336
133
1,400
333
180
241
145
327
136
943
619
913
573
2
7
3
8
2,999
2,886
1
3
6
9
(12) (11)
1
3
5
6
2
3
(4) (2)
The growth in Consumer Healthcare sales of 2% to 3.0 billion

comprised an OTC medicines sales increase of 1%, a Nutritional
healthcare sales increase of 7% and an Oral care sales increase of
2%.
Anti-bacterial sales increased 3%, due to a stronger than normal flu

season in a number of Southern European markets.
61
International
The International region reported year on year turnover growth of
9%. Strong growth in Japan, up 13%, China/Hong Kong, up 11%
and Asia Pacific, up 10%, was partly offset by broadly flat sales in
Canada and Australia. The Canadian sales performance reflected
generic competition for Paxil whilst the Australian business was
negatively impacted by Government pricing reforms.
2005 Year
continued
OTC medicines
Over-the-counter medicine sales were 1,437 million, up 1%. Growth
from analgesics, up 6%, and respiratory tract, up 5%, helped offset
the loss of sales from the dermatological products divested in 2004.
Panadol growth of 12% in International markets was the key driver
of the growth in analgesics.
This was due to lower charges related to legal matters, equal to a 2%

reduction in total SG&A, and lower share-based payment charges,
equal to a 1% decrease in total SG&A, partly offset by higher costs
related to programmes to deliver future cost savings equal to a 1%
increase in total SG&A.

R&D expenditure as a percentage of turnover was 14.5%, in line with
2004, and increased 8% compared with the previous year, partly as
a result of some write-offs of intangible assets. Excluding these writeoffs, R&D expenditure grew slightly below turnover growth.
Pharmaceuticals R&D expenditure represented 16.2% of
pharmaceutical turnover.
On 23rd January 2006, an FDA Advisory Committee recommended

that Alli (orlistat) be approved for over-the-counter use in the USA to
promote weight loss in overweight adults, when used along with a
reduced calorie, low-fat diet. If approved, Alli will be the only FDAapproved weight-loss drug available over-the-counter.
Oral care
Oral care sales grew 2% to 943 million. Sales of Sensodyne and the
denture care brands (Polident, Poligrip and Corega) grew by 12% and
6%, respectively, helping to offset lower sales of other toothpaste
products.

Other operating income includes royalty income, equity investment
disposals and impairments, product disposals and fair value
adjustments to the Quest collar and Theravance options. Other
operating income was 364 million in 2005 compared with 235
million in 2004. The increased income in 2005 is predominantly due
to increased product and asset disposal gains compared with 2004,
and a favourable fair value movement of 19 million in the Quest
collar and the Theravance options.
Nutritional healthcare product sales grew 7% to 619 million.
Lucozade, up 11%, continued to grow strongly in Europe.
Operating profit
Operating profit
Overall, the operating profit margin increased 2.9 percentage points
as operating profit of 6,874 million increased 19% in sterling terms.
At constant exchange rates operating profit increased 16% and the
margin increased 2.5 percentage points, reflecting the lower charges
relating to legal matters and share-based payments, higher product
and asset disposals and increases in advertising, promotion and selling
that were below the rate of turnover growth. Partially offsetting these
items were higher costs related to programmes to deliver future cost
savings and increased R&D expenditure.
The analysis below of operating profit and subsequent discussion

compares the 2005 results with 2004 results.
2005
m
Turnover
21,660 100.0
Cost of sales
(4,764) (22.0)
Selling, general
and administration (7,250) (33.5)
Research and
development
(3,136) (14.5)
Other operating
income
364
1.7
Operating profit
6,874
31.7
2004
m
Growth
CER%
19,986 100.0
(4,360) (21.8)
(7,201) (36.0)
(2,904) (14.5)
235
1.1
5,756
28.8

16
The discussion below compares the 2005 results with the 2004 results.
Gains from asset disposals, including associates, were 290 million
(2004 295 million), costs for legal matters were 430 million (2004
595 million) and charges relating to cost-saving programmes were
141 million (2004 104 million). Share-based payments in 2005
were 236 million (2004 333 million).
19
Cost of sales
Cost of sales as a percentage of turnover increased 0.2 percentage
points. At constant exchange rates, the increase was also 0.2
percentage points, reflecting higher costs related to the ongoing
rectification of manufacturing issues at the Cidra site in Puerto Rico,
which were only partly offset by operating efficiencies compared with
the previous year.
Share of profits/(losses) of joint ventures and associated

undertakings
The share of profits of associates arises principally from the Groups
holding in Quest Diagnostics Inc..

Selling, general and administration (SG&A) as a percentage of
turnover decreased 2.5 percentage points. At constant exchange
rates, the decrease was 2.2 percentage points, reflecting flat
expenditure compared with the prior year on a turnover increase of
7%. SG&A costs were in line with 2004 overall, with higher
advertising, promotion and selling expense being offset by lower
general and administration expenditure. Advertising, promotion and
selling expenses increased 3% and accounted for a 2% increase in
total SG&A. General and administration costs declined 4% and
accounted for a 2% reduction in total SG&A.
Disposal of interest in associates

There were no disposals of interests in associates in 2005. During
2004, the Group disposed of 3.8 million shares from its investment
in Quest Diagnostics Inc. for cash proceeds of 188 million. A profit
of 150 million was recognised. The Groups shareholding in Quest
as at 31st December 2005 was 18.4%.
62
2005 Year
continued
However, there continues to be a wide difference of views between

the Group, the IRS, HMRC and other relevant taxation authorities
where open issues exist. The ultimate liability for such matters may
vary from the amounts provided and is dependent upon the outcome
of litigation proceedings and negotiations with the relevant tax
authorities.
Net finance costs

2005
m
2004
m
Interest income
Unwinding of discount on assets
Fair value adjustments
276
(19)
173
3
257
176
Profit for the year
Finance costs
Interest costs
Unwinding of discount on liabilities
Fair value adjustments
(427)
(25)
1
(346)
(16)
(451)
(362)
Finance income increased compared with 2004 predominantly due to

higher interest rates and higher cash balances. Finance costs increased
due to higher interest rates as well as higher interest costs resulting
from the issue of two 750 million bonds in 2005.
2004
m
UK corporation tax
Overseas taxation
354
1,665
273
1,394
Current taxation
Deferred taxation
2,019
(103)
1,667
90
Total
1,916
1,757
Profit attributable to
shareholders
Earnings per ADS (US$)
Weighted average number
of shares (millions)
2004
m
4,816
4,022
4,689 3,908
82.6p 68.1p
$3.00 $2.49
5,674
Growth
CER% %
17
20
17
18
18
20
21
21
5,736
Diluted earnings per share (pence) 82.0p 68.0p

Diluted earnings per ADS (US$)
$2.98 $2.49
5,720 5,748
Taxation
2005
m
2005
m
Profit for the year was 4,816 million, an increase of 17% (20% in
sterling terms). Profit attributable to minority interests was
127 million and profit attributable to shareholders was 4,689
million, an increase of 17% (20% in sterling terms).
Earnings per share increased 18%, reflecting higher profits and also
the reduction in the weighted average number of shares resulting
from the Groups share buy-back programme. The interest cost of this
programme also impacts the Groups earnings.
The charge for taxation on profit, amounting to 1,916 million,

represents an effective tax rate of 28.5% (2004 30.4%). The tax rate
in 2005 of 28.5% benefited from higher tax relief on the actual or
potential exercise of share options by employees, arising from the
increase in the share price in the year.
At actual rates of exchange, earnings per share increased 21%. The

favourable currency impact on EPS of three percentage points reflects
a strengthening of the US dollar and Euro average exchange rates
relative to 2004 and compares with a 1% favourable currency impact
on turnover. This difference principally arises from a different mix of
currencies in profits compared with turnover.
The integrated nature of the Groups worldwide operations, involving

significant investment in research and strategic manufacture at a
limited number of locations, with consequential cross-border supply
routes into numerous end-markets, gives rise to complexity and delay
in negotiations with revenue authorities as to the profits on which
individual Group companies are liable to tax. Disagreements with,
and between, revenue authorities as to intra-Group transactions, in
particular the price at which goods should be transferred between
Group companies in different tax jurisdictions, can produce conflicting
claims from revenue authorities as to the profits to be taxed in
individual territories. Resolution of such issues is a continuing fact of
life for GSK. The Group has significant open issues with the revenue
authorities in the USA, UK, Japan and Canada, details of which are
set out in Note 12 to the financial statements, Taxation.
Dividend
The Board has declared a fourth interim dividend of 14 pence per
share, resulting in a dividend for the year of 44 pence, a 2 pence
increase over the dividend of 42 pence per share for 2004. The
equivalent fourth interim dividend receivable by ADR holders is
48.7480 cents per ADS based on an exchange rate of 1/$1.7410.
The dividend had an ex-dividend date of 15th February 2006, a record
date of 17th February 2006 and will be paid on 6th April 2006.
Under IFRS interim dividends are only recognised in the accounts when
paid and not when declared. GSK normally pays a dividend two
quarters after the quarter to which it relates and one quarter after it
is declared. Consequently, the 2005 financial statements recognise the
dividends paid in 2005, namely the third and fourth interim dividends
for 2004 and the first and second interim dividends for 2005 totalling
2,390 million.
The Group had total current tax payable liabilities at 31st December
2005 of 2,269 million (2004 1,753 million) in respect of transfer
pricing and other tax matters.
GSK uses the best advice in determining its transfer pricing
methodology and in seeking to manage transfer pricing issues to a
satisfactory conclusion and, on the basis of external professional
advice, continues to believe that it has made adequate provision for
the liabilities likely to arise from open assessments.
63
Finance income
2005 Year
continued
Critical accounting policies
Customer rebates are offered to key managed care and group

purchasing organisations and other direct and indirect customers.
These arrangements require the customer to achieve certain
performance targets relating to value of product purchased,
formulary status or pre-determined market shares relative to
competitors. The accrual for these rebates is estimated based on
the specific terms in each agreement, historical experience and
product growth rates.
The consolidated Financial statements are prepared in accordance with

International Financial Reporting Standards, as adopted for use in the
European Union, following the accounting policies approved by the
Board and described in Note 2 to the ffinancial statements, Accounting
policies. Management is required to make estimates and assumptions
that affect the amounts of assets, liabilities, revenue and expenses
reported in the financial statements. Actual amounts and results could
differ from those estimates. The following are considered to be the
critical accounting policies adopted.
Cash discounts are offered to customers to encourage prompt

payment. These are accrued for at the time of invoicing and adjusted
subsequently to reflect actual experience.
Turnover
Revenue is recognised when title and risk of loss is passed to the
customer and reliable estimates can be made of relevant deductions.
Gross turnover is reduced by rebates, discounts, allowances and
product returns given or expected to be given, which vary by product
arrangements and buying groups. These arrangements with
purchasing organisations are dependent upon the submission of
claims some time after the initial recognition of the sale. Accruals are
made at the time of sale for the estimated rebates, discounts or
allowances payable or returns to be made, based on available market
information and historical experience. Because the amounts are
estimated they may not fully reflect the final outcome, and the
amounts are subject to change dependent upon, amongst other
things, the types of buying group and product sales mix. The level of
accrual is reviewed and adjusted quarterly in the light of historical
experience of actual rebates, discounts or allowances given and
returns made and any changes in arrangements. Future events could
cause the assumptions on which the accruals are based to change,
which could affect the future results of the Group.
Where there is historical experience of customer returns, GSK

records an accrual for estimated sales returns by applying historical
experience of customer returns to the amounts invoiced, together
with market related information such as stock levels at
wholesalers, anticipated price increases and competitor activity.
A reconciliation of gross turnover to net turnover for the US
pharmaceuticals business is as follows:
m
Gross turnover
11,875 100
Chargebacks
US Government and
State programmes
Managed care and
group purchasing
organisation rebates
Cash discounts
Customer returns
Prior year adjustments
Other items
The Groups largest business is US pharmaceuticals, and the US market

has the most complex arrangements for rebates, discounts and
allowances. The following briefly describes the nature of the
arrangements in existence in the Groups US pharmaceuticals business.
2005
%
2004
%
10,835 100
2003
%
11,825 100
786
732
851
775
734
628
686
227
155
(34)
174
6
2
1
575
208
86
(51)
126
5
2
1
(1)
1
567
226
86
(93)
150
5
2
1
(1)
1
Total deductions
2,769
23
2,410
22
2,415
20
The US Medicaid programme is a state-administered programme

providing assistance to certain poor and vulnerable patients. In 1990,
the Medicaid Drug Rebate Program was established to reduce state
and federal expenditure on prescription drugs. GSK participates by
providing rebates to states. Accruals for Medicaid rebates are
calculated based on the specific terms of individual state agreements
using a combination of historical experience, product and
population growth, anticipated price increases and the impact of
contracting strategies. No impact of the Medicaid Part D
arrangements was seen in 2005, but they are expected to affect the
level of discounts given in 2006.
Net turnover
9,106
77
8,425
78
9,410
80
GSK has arrangements with certain key parties, whereby the party
is able to buy products from wholesalers at lower prices. A
chargeback represents the difference between the invoice price to
the wholesaler and the indirect customers contractual discounted
price. Accruals for estimating chargebacks are calculated based on
the terms of each agreement, historical experience and product
growth rates.
Chargebacks
US Government and State programmes
Managed care and group purchasing
organisation rebates
Cash discounts
Customer returns
Other
The increase in customer returns in 2005 arose from product recalls

following the manufacturing issues at the Cidra plant and increased
generic competition.
The total accruals for rebates, discounts, allowances and returns in the
US pharmaceuticals business at 31st December 2005 and 31st
December 2004 were as follows:
Total
64
At 31st
December
2005
m
At 31st
December
2004
m
56
417
50
362
401
27
146
53
297
19
97
31
1,100
856
2005 Year
Intangible assets
Where intangible assets are acquired by GlaxoSmithKline from third
parties the costs of acquisition are capitalised. Licences to compounds
in development are amortised from the point at which they are
available for use, over their estimated useful lives, up to 20 years.
Estimated useful lives are reviewed annually and impairment reviews
are undertaken if events occur which call into question the carrying
values of the assets. Brands acquired with businesses are capitalised
independently where they are separable and have a long-term value
to the Group. Brands are amortised over their estimated useful lives,
not exceeding 20 years, except where the end of the useful economic
life cannot be foreseen. Where brands are not amortised, they are
subject to annual impairment reviews. Impairment reviews are based
on risk-adjusted future cash flows discounted using appropriate
interest rates. These future cash flows are based on business forecasts
and are therefore inherently judgemental. Future events could cause
the values of these intangible assets to be impaired and this would
have an adverse effect on the future results of the Group.
A monthly process is operated to monitor inventory levels at

wholesalers for any abnormal movements. This process uses gross
sales volumes, prescription volumes based on third party data sources
and information received from key wholesalers. The aim of this is to
maintain inventories at a consistent level from year to year based on
the pattern of consumption. On this basis, US pharmaceutical
inventory levels at wholesalers and in other distribution channels at
31st December 2005 were estimated to amount to less than one
month of turnover. This calculation uses third party information, the
accuracy of which cannot be totally verified, but which is believed to
be sufficiently reliable for this purpose.
Taxation
Current tax is provided at the amounts expected to be paid, and
deferred tax on temporary differences between the tax bases of assets
and liabilities and their carrying amounts, at the rates that have been
enacted or substantially enacted by the balance sheet date.
The Group has open tax issues with a number of revenue authorities,
principally in relation to transfer pricing disputes. GSK uses the best
advice in determining its transfer pricing methodology and in seeking
to manage transfer pricing issues to a satisfactory conclusion and, on
the basis of external professional advice, continues to believe that it
has made adequate provision for the liabilities likely to arise from open
assessments. However, there continues to be a wide difference of
views where open issues exist. The ultimate liability for such matters
may vary from the amounts provided and is dependent upon the
outcome of litigation proceedings and negotiations with the relevant
tax authorities.
Pensions and other post-employment benefits

The costs of providing pensions and other post-retirement benefits are
charged to the income statement in accordance with IAS 19R over the
period during which benefit is derived from the employees services.
The costs are assessed in accordance with advice received from
independent actuaries on the basis of assumptions selected by
management for use under both IFRS and US GAAP. These
assumptions include future earnings and pension increases, discount
rates and expected long term rates of return on assets and are
disclosed in Note 26 to the financial statements, Pensions and other
post-employment benefits. The expected long term rates of return
on bonds are determined based on the portfolio mix of index-linked,
government and corporate bonds. An equity risk premium is added
to this for equities. Discount rates are based on appropriate long-term
indices, including the iBoxx over 15 year AA index for the UK, and
Moodys Aa index for the USA. Sensitivity analysis is provided in Note
26, but a 0.25% reduction in the discount rate would lead to an
increase in the net pension deficit of approximately 400 million and
an increase in the annual pension cost of approximately 6 million.
The selection of different assumptions could affect the future results
of the Group.
Legal and other disputes

GSK provides for anticipated settlement costs where a reasonable
estimate may be made of the likely outcome of the dispute and legal
and other expenses arising from claims against the Group. The
companys Directors, having taken legal advice, have established
provisions after taking into account insurance and other agreements
and having regard to the relevant facts and circumstances of each
matter and in accordance with accounting requirements. Provisions
for product liability claims on certain products have been made on an
incurred but not reported basis where sufficient history of claims
made and settlements is available. No provisions have been made for
other unasserted claims or for claims for which no reasonable estimate
of the likely outcome can yet be made. The ultimate liability for
pending and unasserted claims may vary from the amounts provided,
if any, and is dependent upon the outcome of litigation proceedings,
investigations and possible settlement negotiations.
Product rights and goodwill

In addition to the critical accounting policies outlined above, the
accounting policy for product rights and goodwill is deemed to be
important in respect of the balance sheet prepared in accordance
with US accounting principles. Under US GAAP the merger of Glaxo
Wellcome and SmithKline Beecham in 2000 was accounted for as
an acquisition which gave rise to product rights of 24 billion and
goodwill of 16 billion being recognised. Goodwill and those product
rights determined to have indefinite lives are not amortised but rather
reviewed annually for impairment. These impairment reviews assess
business projections prepared as part of the Groups annual
budgeting and planning process to determine whether or not an
impairment in value has occurred. The business projections include
assumptions about future events. Changes in future events could
cause the assumptions in the business projections to change with a
consequent adverse effect on the future results of the Group as
reported under US GAAP.
Impairment of fixed assets

The carrying values of fixed assets subject to depreciation and
amortisation are reviewed for impairment when there is an indication
that the values of the assets might be impaired. Impairment is
determined by reference to the higher of net realisable value and
value in use, measured by reference to risk-adjusted future cash flows
discounted using appropriate interest rates. These future cash flows
are based on business forecasts and are therefore inherently
judgemental. Future events could cause the assumptions used in these
impairment reviews to change with a consequent adverse effect on
the future results of the Group.
65
continued
Financial position and resources
Financial position
Assets
Non-current assets
Property, plant and equipment
Goodwill
Other intangible assets
Investments in associates and
joint ventures
Other investments
Deferred tax assets
Other non-current assets
Total non-current assets
Current assets
Inventories
Current tax recoverable
Trade and other receivables
Liquid investments
Cash and cash equivalents
Assets held for sale
2005
m
2004
m
6,652
696
3,383
6,197
304
2,513
276
362
2,214
438
209
298
2,032
611
14,021
12,164
2,177
416
5,348
1,025
4,209
2
2,193
155
4,451
1,512
2,467
2

The total cost of the Groups property, plant and equipment at 31st
December 2005 was 13.2 billion, with a net book value of 6.7
billion. Of this, land and buildings represented 2.9 billion, plant and
equipment 2.8 billion and assets in construction 1.0 billion. In
2005, GlaxoSmithKline invested 1,001 million in new and renewal
property, plant and equipment. This is mainly related to a large
number of projects for the renewal improvement and expansion of
facilities at various worldwide sites. Property is mainly held freehold.
New investment is financed from Group liquid resources. At 31st
December 2005, the Group had capital contractual commitments for
future expenditure of some 376 million and 2006 operating lease
commitments of 111 million.
GSKs business is science-based, technology-intensive and highly
regulated by governmental authorities. The Group allocates significant
financial resources to the renewal and maintenance of its property,
plant and equipment to minimise risks of interruption of production
and to achieve compliance with regulatory standards. A number of
its processes use chemicals and hazardous materials.
The Group observes stringent procedures and uses specialist skills to
manage environmental risks from these activities. Environmental
issues, sometimes dating from operations now modified or
discontinued, are reported under Responsibility for environment,
health and safety (page 26) and in Note 41 to the ffinancial
statements, Legal proceedings. GSK believes that its facilities are
adequate for its current needs.
Total current assets
13,177
10,780
Total assets
27,198
22,944
Liabilities
Current liabilities
Short-term borrowings
Trade and other payables
Current tax payable
Short-term provisions
(1,200)
(5,147)
(2,269)
(895)
(1,582)
(4,267)
(1,753)
(962)
Total current liabilities
(9,511)
(8,564)
(5,271)
(569)
(4,381)
(569)
(3,069)
(741)
(467)
(2,519)
(569)
(405)
Total non-current liabilities
(10,117)
(8,443)
Total liabilities
(19,628) (17,007)
Non-current liabilities
Long-term borrowings
Deferred tax provision
Pensions and other postemployment benefits
Other provisions
Other non-current liabilities
Net assets
7,570
5,937
Equity
Share capital
Share premium account
Retained earnings
Other reserves
1,491
549
5,579
(308)
1,484
304
4,542
(606)
Shareholders equity
7,311
5,724
259
213
7,570
5,937
Minority interests
Total equity

Other intangible assets include the cost of intangibles acquired from
third parties and computer software. The cost of other intangible
assets as at 31st December 2005 was 3,383 million (2004 2,513
million). Much of the increase in 2005 includes additions of 816
million arising from the acquisitions of Corixa Corporation and ID
Biomedical Corporation.
Investments
GSK held investments, including associates and joint ventures, with
a carrying value at 31st December 2005 of 638 million (2004 507
million). The market value at 31st December 2005 was 1,487 million
(2004 1,292 million). The investments are mainly in equity shares
where the holding derives directly from the Groups business. The
largest of these investments is in the associate, Quest Diagnostics Inc.,
which had a book value at 31st December 2005 of 244 million (2004
173 million). The investments include stakes in companies where
the Group has research collaborations, which provide access to
biotechnology developments of potential interest or interests in
companies that arise from business divestments.
Trade and other receivables include 180 million (2004 5 million)
of derivative financial instruments now held at fair value. The
remaining increase from 2004 reflects increased sales and the impact
of strengthening overseas currencies on the translation of foreign
currency receivables.
Trade and other payables include 171 million (2004 72 million)
of derivative financial instruments now held at fair value. The
remaining increase reflects an increase in customer return and rebate
accruals and strengthening foreign currencies.
66

Provisions
The Group carried deferred tax provisions and other short-term and
non-current provisions of 2,205 million at 31st December 2005
(2004 2,100 million) in respect of estimated future liabilities, of
which 1,165 million related to legal and other disputes.
Share purchases
In 2005, the ESOP Trusts did not make any market purchases of shares
in GSK plc (2004 nil). Shares are held by the Trusts to satisfy future
exercises of options and awards under the Group share option and
award schemes. A proportion of the shares held by the Trusts are in
respect of awards where the rules of the scheme require the company
to satisfy exercises through market purchases rather than the issue of
new shares. The shares held by the Trusts are matched to options and
awards granted and diminish the dilutive effect of new share issues
on shareholders equity and earnings.
Provision has been made for tax, legal and other disputes, indemnified
disposal liabilities and the costs of manufacturing restructuring and
merger integration to the extent that at the balance sheet date an
actual or constructive obligation existed and could be reasonably
estimated.
At 31st December 2005, the ESOP Trusts held 167.4 million GSK
shares against the future exercise of share options and share awards.
The carrying value, which is the lower of cost or expected proceeds,
of 2,313 million has been deducted from other reserves. The
market value of these shares was 2,459 million.

The Group accounts for pension and other post-employment
arrangements in accordance with IAS 19R. The net deficit before
allowing for deferred taxation was 3,069 million (2004 2,519
million). Special cash contributions of 366 million (2004 256
million) were made in 2005 to reduce the funding deficits in the UK
and US plans.
In 2005, GSK repurchased 1 billion of shares as Treasury shares and

expects to repurchase a further 1 billion in 2006. The exact amount
and timing of future purchases will depend on market conditions and
other factors. At 31st December 2005, GSK held 142.8 million shares
as Treasury shares at a cost of 1,799 million, which has been
deducted from retained earnings.
Net debt
2005
m
2004
m
Cash, cash equivalents and liquid

investments
Borrowings repayable within one year
Borrowings repayable after one year
5,234
(1,200)
(5,271)
3,979
(1,582)
(4,381)
Net debt
(1,237)
(1,984)
Net debt reduced by 747 million in 2005 to 1,237 million, primarily

due to increased operating profits, partly offset by the acquisition of
Corixa and ID Biomedical for a total consideration of over 1 billion.
Amounts provided for pensions and post-retirement benefits,

restructuring and integration plans and legal, environmental and other
disputes are set out in Note 27 to the ffinancial statements, Other
provisions.
Total equity
A summary of the movements in equity is set out below.
2005
m
2004
m
Total equity at beginning of year

Implementation of accounting for
financial instruments under IAS 39
5,937
5,598
Total equity at beginning of year, as adjusted

Total recognised income and expense
for the year
Dividends to shareholders
Ordinary shares issued
Ordinary shares purchased and cancelled
Ordinary shares purchased and held as
Treasury shares
Ordinary shares issued by ESOP Trusts
Share-based payments
Changes in minority interest shareholdings
Minority interests
5,925
5,598
4,576
(2,390)
252
3,999
(2,476)
42
(201)
(1,000)
68
265
(40)
(86)
(799)
23
312
(489)
(72)
Total equity at end of year
(12)
7,570
Commitments and contingent liabilities

Financial commitments are summarised in Note 35 to the ffinancial
statements, Commitments. Other contingent liabilities and
obligations in respect of short and long-term debt are set out in Note
29 to the fi
f nancial statements, Contingent liabilities and Note 30 to
the ffinancial statements, Net debt.
Contractual obligations and commitments

The following table sets out the Groups contractual obligations and
commitments at 31st December 2005 as they fall due for payment.
Total
m
Under 1 yr
m
1-3 yrs
m
3-5 yrs
m
5 yrs+
m
Loans
6,350
Interest on loans
3,067
Finance lease obligations 121
Operating lease
commitments
437
Intangible assets
1,833
Property, plant &
equipment
376
Pensions
2,200
Other commitments
64
1,162
233
38
1,490
403
51
344
326
19
3,354
2,105
13
111
273
138
269
85
412
103
879
301
550
26
75
1,100
38
550
Total
2,694
3,564
1,736
6,454
14,448
Commitments in respect of future interest payable on loans are

disclosed after taking into account the effect of interest rate swaps.
5,937
67
continued
continued
Cash flow
The Group has entered into a number of research collaborations to

develop new compounds with other pharmaceutical companies. The
terms of these arrangements can include up-front fees, equity
investments, loans and commitments to fund specified levels of
research. In addition the Group will often agree to make further
payments if future milestones are achieved. As some of these
agreements relate to compounds in the early stages of development,
milestone payments will continue for a number of years if the
compounds move successfully through the development process.
Generally the closer the product is to marketing approval the greater
the possibility of success. The payments shown above within intangible
assets represent the maximum that would be paid if all milestones are
achieved. A number of commitments were made in 2005 under
licensing and other agreements, principally with Vertex Pharmaceuticals
Inc.
A summary of the consolidated cash flow statement is set out below:

2005
m

Net cash outflow from investing activities
Net cash outflow from financing activities
Increase in cash and bank overdrafts
3-5 yrs
m
5 yrs+
m
Guarantees
220
Other contingent liabilities 122
205
13
8
8
7
99
Total
218
16
106
342
617
Exchange adjustments
233
Cash and bank overdrafts at beginning of year 2,355
(93)
1,831
Cash and bank overdrafts at end of year
3,972
2,355
4,209
(237)
2,467
(112)
3,972
2,355
The net cash inflow from operating activities after taxation paid was
5,958 million, an increase of 1,014 million over 2004, arising
principally due to higher operating profits.
The net cash outflow from investing activities was 1,660 million, an
increase of 740 million which reflected the purchase of Corixa and
ID Biomedical in 2005 for over 1 billion (purchases of businesses in
2004 was 0.3 billion reflecting the purchase of Fraxiparine and
Arixtra from Sanofi).
The following table sets out contingent liabilities, comprising

discounted bills, performance guarantees and other items arising in
the normal course of business and when they are expected to expire.
1-3 yrs
m
1,384

Overdrafts
Contingent liabilities
Under 1 yr
m
4,944
(920)
(3,407)

comprise:
GSK has agreed with the trustees of the UK and US pension schemes
to make additional contributions of approximately 370 million per
year over a five-year period ending 31st December 2009 in order to
eliminate the pension deficits on an IAS 19 basis by that point. The
table above shows this commitment, which on the basis of the deficits
at 31st December 2005 amounts to total contributions (normal plus
additional) of approximately 550 million per year. No commitments
have been made past 31st December 2009.
Total
m
5,958
(1,660)
(2,914)
2004
m
Free cash flow was 4,664 million, an increase of 26% over 2004.
Free cash flow is the amount of cash generated by the business after
meeting its obligations for interest, tax and dividends paid to minority
interests, and after capital expenditure on non-current tangible and
intangible assets.
Free cash flow is used by GSKs management for planning and
reporting purposes and in discussions with and presentations to
investment analysts. GSKs free cash flow is presented on a basis other
than in accordance with IFRS. This measure may not be directly
comparable with similarly described measures used by other
companies. A reconciliation of net cash inflow from operating
activities, which is the closest equivalent IFRS measure, to free cash
flow is shown below.
In the normal course of business the Group has provided various

indemnification guarantees in respect of business disposals in which
legal and other disputes have subsequently arisen. A provision is made
where a reasonable estimate can be made of the likely outcome of
the dispute and this is included in Note 27 to the ffinancial statements,
Other provisions.
It is the Groups policy to provide for the settlement costs of asserted
claims and environmental disputes when a reasonable estimate may
be made. Prior to this point no liability is recorded. Legal and
environmental costs are discussed in Risk factors on pages 71 to 74.
Reconciliation of free cash flow

2005
m
GSK uses the best advice in determining its transfer pricing

methodology and, on the basis of external professional advice,
continues to believe that it has made adequate provision for the
liabilities likely to arise from open taxation assessments. The ultimate
liability for such matters may vary significantly from amounts provided
and is dependent upon the outcome of litigation proceedings and
negotiations with the relevant tax authorities. This is discussed further
in Note 12 to the ffinancial statements, Taxation.

Purchase of non-current intangible assets
Purchase of non-current tangible assets
Disposal of non-current tangible fixed assets
Interest paid
Interest received
Dividends received from joint ventures and
associated undertaking
Dividends paid to minority interests
5,958
(903)
(278)
54
(381)
290
4,944
(788)
(255)
53
(350)
173
10
(86)
11
(75)
Free cash flow
4,664
68
2004
m
3,713

continued
2005
m
2004
m
Net debt at beginning of year

Increase in cash in the year
Cash (outflow)/inflow from management
of liquid resources
Net increase in long-term loans
Net repayment of short-term loans
Exchange and other movements
(1,984)
1,384
(1,648)
617
(550)
(912)
857
(32)
53
(1,350)
407
(63)
Net debt at end of year
(1,237)
(1,984)
Investment appraisal
GSK has a formal process for assessing potential investment proposals
in order to ensure decisions are aligned with the Groups overall
strategy. This process includes an analysis of the impact on profit and
assessment of the return based on discounted cash flows. The
discount rate used to perform financial analysis is decided internally,
to allow determination of the extent to which investments cover the
Groups cost of capital. For specific investments the discount rate may
be adjusted to take into account country or other risk weightings.
Payment performance
At 31st December 2005, the average number of days purchases
represented by trade and fixed asset creditors of the parent company
was nil (2004 nil) and in respect of the company and its UK
subsidiaries in aggregate was 22 days (2004 21 days).
Treasury policies
GlaxoSmithKline plc reports in sterling and pays dividends out of
sterling profits. The role of Corporate Treasury in GSK is to manage
and monitor the Groups external and internal funding requirements
and financial risks in support of Group corporate objectives. Treasury
activities are governed by policies and procedures approved by the
Board and monitored by a treasury management group.
GSK maintains treasury control systems and procedures to monitor
foreign exchange, interest rate, liquidity, credit and other financial risks.
Liquidity
GSK operates globally, primarily through subsidiary companies
established in the markets in which the Group trades. Due to the
nature of GSKs business, with patent protection on many of the
products in its portfolio, the Groups products compete largely on
product efficacy rather than on price. Selling margins are sufficient to
cover normal operating costs and the Groups operating subsidiaries
are substantially cash generative.
Capital expenditure and financial investment

Cash payments for tangible and intangible fixed assets amounted to
1,181 million (2004 1,043 million). Disposals realised 275 million
(2004 53 million). Cash payments to acquire equity investments
of 23 million (2004 103 million) were made in the year and sales
of equity investments realised 35 million (2004 58 million).
Operating cash flow is used to fund investment in the research and

development of new products as well as routine outflows of capital
expenditure, tax, dividends and repayment of maturing debt. The
Group may, from time to time, have additional demands for finance,
such as for share purchases and acquisitions.
Future cash flow

The Group expects that future operating cash flow will be sufficient
to fund its operating and debt service costs, to satisfy normal levels
of capital expenditure, to meet obligations under existing licensing
agreements and to meet other routine outflows including tax and
dividends, subject to the risk factors discussed on pages 71 to 74.
The Group may from time to time have additional demands for
finance, such as for acquisitions. The Group has access to other
sources of liquidity from banks and other financial institutions, in
addition to the cash flow from operations, for such needs.
GSK operates with a high level of interest cover and at low levels of
net debt relative to its market capitalisation. In addition to the strong
positive cash flow from normal trading activities, additional liquidity
is readily available via its commercial paper programme and shortterm investments. The Group also has a European Medium Term Note
programme of 5 billion, of which 3.5 billion was in issue at 31st
December 2005. In 2004, the Group established a US Shelf
Registration of $5 billion; at 31st December 2005 $2.4 billion (1.4
billion) was in issue.
Payment policies
Treasury operations
The objective of treasury activity is to manage the post-tax net
cost/income of financial operations to the benefit of Group earnings.
Corporate Treasury does not operate as a profit centre. GSK uses a
variety of financial instruments, including derivatives, to finance its
operations and to manage market risks from those operations.
Group companies are responsible for monitoring and managing their

working capital. The terms of sales collections and supplier payments
reflect local commercial practice.
In the UK, the company and each of its UK subsidiaries have policies
to ensure that suppliers are paid on time. In particular, the UK
companies seek:
Derivatives, principally comprising forward foreign currency contracts,

interest rate and currency swaps, are used to swap borrowings and
liquid assets into the currencies required for Group purposes and to
manage exposure to funding risks from changes in foreign exchange
rates and interest rates.
to settle terms of payment with suppliers when agreeing the terms

of the transaction
to ensure that suppliers are made aware of the agreed terms
of payment
to abide by the terms of payment.
The policy includes arrangements for accelerated payment of small
suppliers.
69
Reconciliation of net cash flow to movement in net debt

continued
Borrowings denominated in, or swapped into, foreign currencies that

match investments in overseas Group assets are treated as a hedge
against the relevant net assets.
GSK balances the use of borrowings and liquid assets having regard
to: the cash flow from operating activities and the currencies in which
it is earned; the tax cost of intra-Group distributions; the currencies
in which business assets are denominated; and the post-tax cost of
borrowings compared to the post-tax return on liquid assets.
Based on the composition of net debt at 31st December 2005, a 10%

appreciation in sterling against major currencies would result in a
reduction in the Groups net debt of approximately 61 million.
A 10% weakening in sterling against major currencies would result
in an increase in the Groups net debt of approximately 75 million.
Liquid assets surplus to the immediate operating requirements of

Group companies are generally invested and managed centrally by
Corporate Treasury. Requirements of Group companies for operating
finance are met whenever possible from central resources.
Interest rate risk management

GSKs policy on interest rate risk management requires that the
amount of net borrowings at fixed rates increases with the ratio of
forecast net interest payable to trading profit.
External borrowings, mainly managed centrally by Corporate Treasury,

comprise a portfolio of long and medium-term instruments and shortterm finance.
The Group uses a limited number of interest rate swaps to

redenominate external borrowings into the interest rate coupon
required for Group purposes. The duration of these swaps matches
the duration of the principal instruments. Interest rate derivative
instruments are accounted for as fair value or cash flow hedges of the
relevant assets or liabilities.
GSK does not hold or issue derivative financial instruments for trading
purposes and the Groups Treasury policies specifically prohibit such
activity. All transactions in financial instruments are undertaken to
manage the risks arising from underlying business activities, not for
speculation.
Funding, maturity and counterparty risk

The Group invests centrally managed liquid assets in government
bonds, short-term corporate debt instruments with a minimum
short-term credit rating of A-1/P-1, money market funds with a credit
rating of AAA/Aaa and other structured investments (credit ratings
shown are from Standard and Poors and Moodys Investors Services,
respectively).
The Group manages centrally the short-term cash surpluses or

borrowing requirements of subsidiary companies and uses forward
contracts to hedge future repayments back into the originating
currency.
Sensitivity analysis considers the sensitivity of the Groups net debt to
hypothetical changes in market rates and assumes that all other
variables remain constant. Based on the composition of net debt and
financing arrangements at 31st December 2005, and taking into
consideration all fixed rate borrowings in place, a one percentage
point (100 basis points) decrease in average interest rates would result
in an increase in the Groups annual net interest charge of
approximately 19 million.
The Group manages its net borrowing requirements through a

portfolio of long-term borrowings, including bonds, together with
short-term finance under the US$10 billion commercial paper
programme. In 2005, two bonds were issued under the European
Medium Term Note programme: a 750 million, seven year, 3%
coupon bond and a 750 million, 20 year, 4% coupon bond.
Equity risk management

Equity investments classified as current assets are available-for-sale
and the Group manages disposals to meet overall business
requirements as they arise. The Group regularly monitors the value of
its equity investments and only enters into hedges selectively with the
approval of the Board.
The Groups long-term borrowings mature at dates between 2006

and 2034. These include a private financing which, although maturing
in 2032, may be redeemed by GSK at any time and, in particular, in
the event of any accelerating event that would increase the cost of
funding for the Group. GSKs long-term debt rating is AA from
Standard and Poors and Aa2 from Moodys Investors Services. The
agencies short-term ratings for paper issued under the Groups
commercial paper programme are A-1+ and P-1 respectively.
Financial assets and liabilities

An analysis of net debt is given in Note 30 to the ffinancial statements,
Net debt. An analysis of financial assets and liabilities at carrying
value and fair value and a reconciliation to net debt are given in Note
36 to the ffinancial statements, Financial instruments and related
disclosures, together with a discussion of derivative financial
instruments and quantitative disclosures about market risk in
accordance with the requirements of IAS 32 and IAS 39.
Foreign exchange risk management

In GSK foreign currency transaction exposure arising on normal trade
flows, in respect of both external and intra-Group trade, is not
hedged. The policy is to minimise the exposure of overseas operating
subsidiaries to transaction risk by matching local currency income with
local currency costs. For this purpose, intra-Group trading transactions
are matched centrally and intra-Group payment terms are managed
to reduce risk. Exceptional foreign currency cash flows are hedged
selectively under the management of Corporate Treasury.
The Group continues to benefit from strong positive cash flow. Group
net debt would have decreased significantly in the year to 31st
December 2005, but for the Groups purchase of its own shares in the
market of 1 billion and acquisitions of approximately 1 billion.
A significant proportion of Group borrowings, including the

commercial paper programme, is in US dollars, to benefit from the
liquidity of US dollar denominated capital markets. Certain of these
and other borrowings are swapped into other currencies as required
for Group purposes. The Group seeks to denominate borrowings in
the currencies of its principal assets and cash flows.
The financial assets and liabilities at 31st December 2005 are

representative of the treasury policies and strategies of GSK, applied
consistently during the year. There were no significant changes in
such policies throughout the year.
70

Outlook
Sales growth of existing products and launch of new products are
key drivers of GSKs business performance. The strong growth seen
from key products such as Seretide/Advair, Avandia/Avandamet and
from GSKs vaccines business is expected to continue in 2006. Eight
major development projects are scheduled to enter phase III in 2006.
These include the oncology products casopitant and pazopanib, as
well as products for Alzheimers disease, HIV, meningitis, lupus and
diabetes. Up to seven product filings are planned in 2006. These
include two vaccines, Cervarix for cervical cancer and a potential flu
pandemic vaccine, Allermist for allergic rhinitis, eltrombopag for low
platelet count to help patients suffering from thrombocytopenia,
Tykerb for breast cancer, mepolizumab for hypereosinophilic syndrome
and Lamictal XR, a once-daily formulation for epilepsy.
Risk of loss or expiration of patents or marketing exclusivity

Patent infringement litigation
Efforts by generic manufacturers may involve challenges to the validity
of a patent or assertions that the alternative compounds do not
infringe the Groups patents. If the Group is not successful during the
patent protection or data exclusivity periods in maintaining exclusive
rights to market one or more of its major products, particularly in the
USA where the Group has its highest turnover and margins, the
Groups turnover and margins would be adversely affected. See Note
41 to the fi
f nancial statements, Legal proceedings, for a discussion
of patent-related proceedings in which the Group is involved.
Seven products are expected to be launched/approved in 2006. These

include Rotarix for rotavirus, Entereg for post-operative bowel
disorders, Trexmia for migraine, Avandaryl for diabetes, Coreg CR for
heart failure, Arranon for cancer and Altabax for infections.
Generic drug manufacturers are seeking to market generic versions

of many of the Groups most important products, including Avandia,
Zofran, Wellbutrin XL, Imitrex, Lamictal, Valtrex and Paxil CR, prior to
the expiration of the Groups patents, and have exhibited a readiness
to do so for other products in the future. Generic products competitive
with Paxil IR and Wellbutrin SR were launched in the USA in 2003 and
2004, respectively, and had a significant impact on the Groups overall
turnover and earnings.
Typically, sales of existing products decline dramatically when generic

competition is introduced either on patent expiry or earlier if there is
a successful challenge to the Groups patent. GlaxoSmithKline is
engaged in legal proceedings regarding the validity and infringement
of the Groups patents relating to many of its products. These are
discussed in Risk factors below and in Note 41 to the ffinancial
statements, Legal proceedings.
GSKs published earnings guidance for 2006 is that earnings per
share growth is expected to be around 10% in constant exchange
rate terms.
Weakness of intellectual property protection in certain

countries
In some of the countries in which the Group operates, patent
protection may be significantly weaker than in the USA or the
European Union. In addition, in an effort to control public health
crises, some developing countries, such as South Africa and Brazil,
have considered plans for substantial reductions in the scope of patent
protection for pharmaceutical products. In particular, these countries
could facilitate competition within their markets from generic
manufacturers who would otherwise be unable to introduce
competing products for a number of years.
The Group has net debt of 1.2 billion, which is low relative to its
market capitalisation, and this positions it to take advantage of any
opportunities that might arise to build the business.
There are risks and uncertainties inherent in the business that may
affect future performance including R&D projects, anticipated sales
growth and expected earnings growth. These are discussed in Risk
factors below.
Risk factors
Any loss of patent protection, including abrogation of patent rights

or compulsory licensing, is likely to affect adversely the Groups
operating results in those national markets but is not expected to be
material to the Group overall. Absence of adequate patent protection
could limit the opportunity to look to such markets for future sales
growth.
There are risks and uncertainties relevant to the Groups business. The
factors listed below are among those that the Group thinks could
cause the Groups actual results to differ materially from expected and
historical results.
Risk that R&D will not deliver commercially successful new

products
Continued development of commercially viable new products is
critical to the Groups ability to replace sales of older products that
decline upon expiration of exclusive rights, and to increase overall
sales. Developing new products is a costly, lengthy and uncertain
process. A new product candidate can fail at any stage of the process,
and one or more late-stage product candidates could fail to receive
regulatory approval.
71
New product candidates may appear promising in development but,

after significant investments, fail to reach the market or have only limited
commercial success as a result of efficacy or safety concerns, inability
to obtain necessary regulatory approvals, difficulty or excessive costs to
manufacture, infringement of patents or other intellectual property
rights of others or inability to differentiate the product adequately from
those with which it competes.
continued
Risk of substantial adverse outcome of litigation and

government investigations
See Note 41 to the fi
f nancial statements, Legal proceedings, for a
discussion of proceedings and governmental investigations in which
the Group is currently involved. Unfavourable resolution of these and
similar future proceedings or investigations may have a material
adverse effect on the Groups financial results. The Group has made
material provisions in 2003, 2004 and 2005 related to legal
proceedings and investigations which reduced its earnings. The Group
may also make additional significant provisions related to legal
proceedings and investigations in the future, which would reduce its
earnings. In many cases the practice of the plaintiff bar is to claim
damages compensatory, punitive and statutory in amounts that
bear no relationship to the underlying harm. Accordingly it is
potentially misleading to quantify the potential exposure to claims,
proceedings and investigations of the type described in Note 41.
Anti-trust litigation
In the USA it has become increasingly common that following an
adverse outcome in prosecution of patent infringement actions, the
defendants and direct and indirect purchasers and other payers initiate
anti-trust actions as well. Claims by direct and indirect purchasers and
other payers are typically filed as class actions and the relief sought
may include treble damages and restitution claims. Damages in
adverse anti-trust verdicts are subject to automatic trebling in the USA.
Sales, marketing and regulation
The Group operates globally in complex legal and regulatory
environments that often vary among jurisdictions. The failure to
comply with applicable laws, rules and regulations in these jurisdictions
may result in civil and criminal legal proceedings. In the USA, for
example, the Group is responding to federal and state governmental
investigations into pricing, marketing and reimbursement of its
prescription drug products. These investigations could result in related
restitution or civil false claims act litigation on behalf of the federal or
state governments, as well as related proceedings initiated against
the Group by or on behalf of consumers and private payers. Such
proceedings may result in trebling of damages awarded or fines in
respect of each violation of law. Criminal proceedings may also be
initiated against Group companies or individuals.
Recent insurance loss experience, including pharmaceutical product

liability exposures, has increased the cost of, and narrowed the
coverage afforded by, insurance for pharmaceutical companies
generally, including the Group.
In order to contain insurance costs in recent years the Group has
continued to adjust its coverage profile, accepting a greater degree
of un-insured exposure. In addition, where claims are made under
insurance policies, insurers may reserve the right to deny coverage on
various grounds. If denial of coverage is ultimately upheld on these
claims, this could result in material additional charges to the Groups
earnings.
Risks of competition, price controls and limitations on sales

Third party competition
The Group operates in highly competitive businesses. In the
pharmaceuticals business, it faces competition both from proprietary
products of large international manufacturers and producers of
generic pharmaceuticals. Significant product innovations, technical
advances or the intensification of price competition by competitors
could adversely affect the Groups operating results. Continued
consolidation in the pharmaceutical industry could adversely affect
the Groups competitive position, while continued consolidation
among the Groups customers may increase pricing pressures. The
Group had 12 products with over 500 million in annual global sales
in 2005.
Product liability litigation

Pre-clinical and clinical trials are conducted during the development
of potential products to determine the safety and efficacy of products
for use by humans following approval by regulatory bodies.
Notwithstanding these efforts, when drugs and vaccines are
introduced into the marketplace, unanticipated side effects may
become evident. The Group is currently a defendant in a number of
product liability lawsuits, including class actions, that involve
substantial claims for damages related to the Groups pharmaceutical
products. Litigation, particularly in the USA, is inherently unpredictable
and excessive verdicts that are not justified by the evidence can occur.
Class actions that sweep together all persons who were prescribed the
Groups products can inflate the potential liability by the force of
numbers. Claims for pain and suffering and punitive damages are
frequently asserted in product liability actions and, if allowed, can
represent potentially open-ended exposure.
Among these products is Augmentin IR, with respect to which the

Group already has generic competition, and Zofran, Imitrex, Valtrex,
Avandia and Wellbutrin XL, with respect to which the Groups
intellectual property rights in the USA are currently the subject of
litigation, and Flonase, for which the FDA approved the first generic
version in February 2006.
72

Regulatory controls
The Group must comply with a broad range of regulatory controls on
the testing, approval, manufacturing and marketing of many of its
pharmaceutical and consumer healthcare products, particularly in the
USA and countries of the European Union, that affect not only the
cost of product development but also the time required to reach the
market and the uncertainty of successfully doing so. Stricter regulatory
controls also heighten the risk of withdrawal by regulators on the
basis of post-approval concerns over product safety, which would
reduce revenues and can result in product recalls and product liability
lawsuits.
If these or any of the Groups other major products were to become

subject to a problem such as loss of patent protection, unexpected
side effects, regulatory proceedings, publicity affecting doctor or
patient confidence or pressure from competitive products, or if a new,
more effective treatment should be introduced, the adverse impact on
the Groups revenues and operating results could be significant. In
particular, the Group faces intense competition from manufacturers of
generic pharmaceutical products in all of its major markets. Generic
products often enter the market upon expiration of patents or data
exclusivity periods for the Groups products. Introduction of generic
products typically leads to a dramatic loss of sales and reduces the
Groups revenues and margins for its proprietary products. The
expiration dates for patents for the Groups major products are set out
on page 25 and legal proceedings involving patent challenges are set
out in Note 41 to the fi
f nancial statements, Legal proceedings.
In addition, in some cases the Group may voluntarily cease marketing

a product (for example the withdrawal of Lotronex in 2000 shortly
after its initial launch in the USA) or face declining sales based on
concerns about efficacy or safety, whether or not scientifically justified,
even in the absence of regulatory action. The development of the
post-approval adverse event profile for a product or the product class
may have a major impact on the marketing and sale of the product.
Governmental and payer controls

Pharmaceutical products are subject to price controls or pressures and
other restrictions in many markets, including Japan, Germany, France
and Italy. Some governments intervene directly in setting prices. In
addition, in some markets major purchasers of pharmaceutical
products (whether governmental agencies or private health care
providers) have the economic power to exert substantial pressure on
prices or the terms of access to formularies.
Risk of interruption of product supply

The manufacture of pharmaceutical products and their constituent
materials requires compliance with good manufacturing practice
regulations. The Groups manufacturing sites are subject to review
and approval by the FDA and other regulatory agencies. Compliance
failure by suppliers of key materials or the Groups own manufacturing
facilities could lead to product recalls and seizures, interruption of
production and delays in the approvals of new products pending
resolution of manufacturing issues. Non-compliance can also result in
fines and disgorgement of profits. Any interruption of supply or fines
or disgorgement remedy could materially and adversely affect the
Groups financial results. The Groups Cidra, Puerto Rico facility has
worked at resolution of FDA observations of deficiencies in
manufacturing practices and is subject to compliance with a consent
decree entered into with the FDA during 2005, as referred to in Note
41 to the ffinancial statements, Legal proceedings. As a consequence
of those discussions, supplies of certain products manufactured at
Cidra were curtailed or constricted which had an adverse impact on
sales in 2005.
The Group cannot predict whether existing controls will increase or

new controls will be introduced that will reduce the Groups margins
or affect adversely its ability to introduce new products profitably.
For example, in the USA, where the Group has its highest margins and
most sales for any country, pricing pressures could significantly
increase following implementation of the pharmaceutical benefit
under Medicare, or in the event that other state programmes to
control the cost of prescription drugs are adopted. As experience
develops under the Medicare program outpatient pharmaceutical
coverage for its beneficiaries in 2006, the US government, or the
private insurers through which coverage will be offered, through their
enormous purchasing power under the program could demand
discounts that may implicitly create price controls on prescription
drugs. Additionally, a number of states have proposed or implemented
various schemes to control prices for their own senior citizens
programs, including importation from other countries and bulk
purchases of drugs. The growth in the number of patients covered
through large managed care institutions in the USA, which is likely to
increase with implementation of the Medicare benefit, also increases
pricing pressures on the Groups products. These trends may adversely
affect the Groups revenues and margins from sales in the USA.
While the Group undertakes business continuity planning, single

sourcing for certain components, bulk active materials and finished
products creates a risk of failure of supply in the event of regulatory
non-compliance or physical disruption at the manufacturing sites.
73
continued
continued
Risk from concentration of sales to wholesalers

In the USA, in line with other pharmaceutical companies, the Group
sells its products through a small number of wholesalers in addition
to hospitals, pharmacies, physicians and other groups. Sales to the
three largest of which amounted to approximately 80% of the
Groups US pharmaceutical sales. At 31st December 2005, the Group
had trade receivables due from these three wholesalers totalling
1,051 million (31st December 2004 710 million). The Group is
exposed to a concentration of credit risk in respect of these
wholesalers such that, if one or more of them is affected by financial
difficulty, it could materially and adversely affect the Groups financial
results.
Global political and economic conditions

The Group conducts a substantial portion of its operations outside the
UK. The Groups management of foreign exchange rates is discussed
in Operating and financial review and prospects, Foreign exchange
risk management. Fluctuations in exchange rates between sterling
and other currencies, especially the US dollar, the Euro and the
Japanese Yen, materially affect the Groups financial results.
The Group has no control over changes in inflation and interest rates,
foreign currency exchange rates and controls or other economic
factors affecting its businesses or the possibility of political unrest,
legal and regulatory changes or nationalisation in jurisdictions in which
the Group operates. These factors could materially affect the Groups
future results of operations.
Environmental liabilities
The environmental laws of various jurisdictions impose actual and
potential obligations on the Group to remediate contaminated sites.
The Group has also been identified as a potentially responsible party
under the US Comprehensive Environmental Response Compensation
and Liability Act at a number of sites for remediation costs relating to
the Groups use or ownership of such sites. Failure to manage properly
the environmental risks could result in additional remedial costs that
could materially and adversely affect the Groups operations. See Note
41 to the ffinancial statements, Legal proceedings, for a discussion
of environmental-related proceedings in which the Group is involved.
Accounting standards
New or revised accounting standards and rules promulgated from
time to time by US or international accounting standard setting boards
could have a material adverse impact on the Groups reported financial
results. With the adoption of International Financial Reporting
Standards (IFRS), changes in the market valuation of certain financial
instruments (such as the equity collar linked to the Groups investment
in Quest Diagnostics, the put and call options linked to the Groups
strategic alliance with Theravance and impairments of equity
investments) are reflected in the Groups reported results before those
gains or losses are actually realised and could have a significant impact
on the results in any given period. The Group believes that it complies
with the appropriate regulatory requirements concerning its financial
statements and disclosures. However, other companies have
experienced investigations into potential non-compliance with
accounting and disclosure requirements that have resulted in
significant penalties.
Reliance on information technology

The Group is increasingly dependent on information technology
systems, including Internet-based systems, for internal communication
as well as communication with customers and suppliers. Any
significant disruption of these systems, whether due to computer
viruses or other outside incursions, could materially and adversely
affect the Groups operations.
Taxation
The effective tax rate on the Groups earnings benefits from the fact
that a portion of its earnings is taxed at more favourable rates in some
jurisdictions outside the UK. Changes in tax laws or in their application
with respect to matters, such as transfer pricing and the risk of double
taxation, that relate to the portion of the Groups earnings taxed at
more favourable rates, could increase the Groups effective tax rate
and adversely affect its financial results. The Group has open issues
with the revenue authorities in the USA, UK, Japan and Canada. By
far the largest relates to Glaxo heritage products, in respect of which
the US Internal Revenue Service and UK Inland Revenue have made
competing and contradictory claims. These matters are discussed in
Note 12 to the ffinancial statements, Taxation.
Human resources
The Group has approximately 100,000 employees around the world
and is subject to laws and regulations concerning its employees
ranging from discrimination and harassment to personal privacy to
labour relations that vary significantly from jurisdiction to jurisdiction.
Failure to continue to recruit and retain the right people and maintain
a culture of compliance could have a significant adverse affect on the
Group.
Disruption from pandemic influenza

In the event of pandemic influenza, the Group could be subject to
disruption from a range of factors. National governments may be
more willing to abrogate intellectual property rights for medicines
that might otherwise be in short supply. In a country afflicted by
pandemic flu, there would be a risk that employees and their families
will be affected with the consequence that sales and distribution and
manufacturing activities could be shut down and supply continuity
for active ingredients and finished goods affected.
74
2004 Year
In accordance with US SEC disclosure requirements, the following

discussion compares results for the year to 31st December 2004 with
the results for the year to 31st December 2003. The information has
been prepared under IFRS.
All growth rates are at constant exchange rates (CER) unless otherwise
stated. The sterling growth rates for turnover by product may be
found in the table of pharmaceutical sales by therapeutic area on
page 77.
Total pharmaceutical turnover in 2004 was 17,100 million compared

with 18,114 million in 2003, an increase of 1% CER. In sterling terms
turnover declined 6%, principally due to the weakness of the US
dollar.
Exchange
Pharmaceutical turnover by therapeutic area
The currencies that most influence the Groups results are the US
dollar, the Euro and the Japanese Yen.
GSKs ability to continue to deliver pharmaceutical turnover growth,

despite generic competition to several of its products, is primarily due
to an exceptionally broad product portfolio of fast-growing, highvalue products.
The pound hit its highest level against the dollar for more than four
years, climbing to $1.92 at the year-end, and the Euro gained 1%
against sterling and 8% against the dollar in 2004. This was the
second consecutive year that the dollar has fallen in value against the
Euro, due to the impact of continued unrest in Iraq, tension elsewhere
in the world and concerns for the US economy.
These include the respiratory product Seretide/Advair, up 19% (2.4

billion), the diabetes treatment Avandia/Avandamet, up 32% (1.1
billion), Lamictal for epilepsy/bipolar disorder, up 33% (0.7 billion),
Valtrex for herpes, up 24% (0.6 billion), Coreg for heart disease, up
34% (0.4 billion) and vaccines, up 11% (1.2 billion).

Global pharmaceutical sales increased by 9% in 2004 to 284 billion.
World market by
Value
% of
Growth
geographic region
bn
total
CER% %
In all, 12 GSK products each had sales of over 500 million in 2004.
USA
Europe
Germany
France
UK
Italy
Japan
Asia Pacific
Latin America
Middle East, Africa
Canada
124.7
82.3
15.5
15.0
10.5
9.7
30.9
19.3
12.1
8.6
6.0
44
29
5
5
4
3
11
7
4
3
2
10
8
6
8
10
6
3
13
16
13
10
(2)
8
6
8
10
6
1
6
2
5
8
Total
283.9
100
Respiratory
GSK continued to be the global leader in respiratory pharmaceuticals
with sales of its three key products, Seretide/Advair, Flixotide/Flovent
and Serevent, amounting to 3.4 billion, up 9%. Sales of
Seretide/Advair, the Groups largest product, grew 19% to 2.4 billion
although this contributed to declines in Serevent and Flixotide, its
constituent products.
In the USA, Advair sales grew 20% to 1.3 billion. Growth of Seretide
in Europe was also strong (up 19% to 882 million). International
sales grew 15%, reflecting good growth in all geographic areas.
The older respiratory products Ventolin and Becotide continued to
decline as patients converted to newer products.

CNS sales declined 16% to 3.5 billion. Sales declined in all regions.
Growth in the US market has slowed but remains in double digits

and now represents 44% of the global prescription pharmaceutical
market compared to 30% a decade ago.
Total sales of Paxil were down 39% to 1.1 billion as a result of generic
competition to Paxil IR, sales of which declined 53% to 667 million.
Mitigating this decline was the strong performance of the product in
Japan, up 25% to 171 million and the performance of Paxil CR,
which generated sales of 396 million, up 14%.
At 30th September 2004, GSK held second position in the world

pharmaceutical market with a market share of 6.5%, behind Pfizer
with a market share of 10.1%. GSK had eight of the worlds top 60
pharmaceutical products. These were Augmentin, Avandia,
Imigran/Imitrex, Lamictal, Seretide/Advair, Seroxat/Paxil, Wellbutrin
and Zofran.
World market
top five therapeutic classes
Value
bn
% of
total
Cardiovascular
Alimentary tract and metabolic
Anti-infectives (bacterial, viral
and fungal) excluding vaccines
Respiratory
48.3
47.1
35.1
17
17
12
9
11
6
3
4
(1)
30.6
19.5
11
7
6
5
(1)
(1)
Growth
CER% %
Total sales of Wellbutrin products fell 12% to 751 million. Wellbutrin

IR and SR sales fell 64% to 284 million as a result of generic
competition. This impact was partially offset, however, by the
exceptionally strong performance of Wellbutrin XL, the new oncedaily product, which achieved sales of 467 million in its first full year
on the market.
The strong growth of GSKs epilepsy and bi-polar disorder treatment
Lamictal continued, with sales up 33% to 677 million. Ongoing US
growth, up 49% to 414 million, is being driven by the indication for
the maintenance treatment of bi-polar disorder received in 2003.
(Note: data based on 12 months to 30th September 2004.)
75
All growth rates included in the review of turnover are at constant

exchange rates (CER) unless otherwise stated. The sterling growth
rates may be found in the tables of pharmaceutical turnover by
therapeutic area on page 77.
2004 Year
continued
Anti-virals
Global HIV product sales rose 4% to 1.5 billion and sales in the USA
increased 4% to 747 million. GSK continued to grow its HIV
franchise, despite the launch of several new products by competitors.
Total sales of Paxil were down 51% to 519 million as a result of

generic competition to Paxil IR (sales of which declined 82% to 131
million). Mitigating this decline was the performance of Paxil CR,
which generated sales of 388 million, up 13%.
HIV performance was enhanced by the launch of Epzicom, a new

combination product (Epivir/Ziagen) in the USA in August 2004.
Sales in the anti-virals therapeutic area grew 12%, with HIV products
up 4%. Valtrex, for herpes, grew 30% driven by patients switching
to suppression therapy.
Sales of the herpes treatment Valtrex exceeded 500 million for the
first time in 2004 (up 24% to 571 million). Performance was driven
by the USA (up 30% to 369 million) where the product is the clear
market leader in treatments for genital herpes.
Sales of Avandia/Avandamet increased by 26%. Anti-bacterial sales

declined 24% as a result of generic competition that began in the
third quarter of 2002. Coreg sales increased 37% as it continued to
benefit from its wide range of indications.
Anti-bacterials
Anti-bacterial sales declined 9% worldwide and 24% in the USA,
reflecting generic competition in all regions.
Vaccines grew 6% reflecting the good performance of Pediarix.
Europe
The discussion of individual market performance in the Europe region
is on a turnover created basis rather than a turnover invoiced basis.
See 2005 Year on page 60 for an explanation of the adjustments
made.
Metabolic
The diabetes treatments Avandia/Avandamet continued to perform
very strongly, with overall sales of 1.1 billion (up 32%).
Sales in the USA grew 26% to 852 million. Encouragingly, Avandia/
Avandamet also grew very strongly in Europe and International
markets with sales up 52% and 62%, respectively. Strong
performance in these markets was driven by the growing acceptance
amongst opinion leaders and physicians of the benefits of these new
products in improving control for diabetic patients.
Europe region contributed 30% of pharmaceutical turnover. Although

overall turnover growth in the region was only 2%, good growth was
recorded in Spain and Southern and Eastern Europe. Government
healthcare reforms, including pricing and reimbursement restrictions,
adversely affected turnover in France, Italy and Germany.
Seretide, GSKs largest selling product in Europe, grew 19% and
reported notable growth in Spain and the UK. Seretide and its
constituent products Serevent and Flixotide grew 9%.
Vaccines
The vaccines business had a strong year, with sales up 11% to 1.2
billion. Several key products drove growth Pediarix/Infanrix up 12%
to 356 million, Priorix, up 14% to 95 million and Fluarix, up 38%
to 79 million.
The decline in sales of the herpes franchise was mainly as a result of

generic competition for Zovirax, partially offset by patients switching
to the newer product, Valtrex.
Oncology and emesis

Sales of Zofran grew 8% to 763 million, driven by the US
performance, up 10% to 565 million.
Seroxat sales were down 31%, reflecting generic competition in the

UK and France.

In 2004, Coreg (for heart disease) sales grew 34% to 432 million.
Anti-bacterial sales declined 6% due to generic competition

throughout the region
Other therapeutic areas

Sales of Zantac fell 12% to 273 million, with declines in all regions.
Vaccines grew by 7% driven by the hepatitis franchise and Infanrix.
International
The International region reported year on year turnover growth of
4%. Strong growth in Asia Pacific, up 8% and Latin America, up 8%,
was offset by flat sales in Australia and declines of 5% in Sub-Saharan
Africa, 8% in the Middle East/North Africa and 11% in Canada. In
Canada, the sales decline was due to generic erosion of Paxil IR,
excluding this element, Canada grew 4.5%.
USA
The USA reported flat turnover in 2004 despite the significant impact
of generic competition to Paxil and Wellbutrin. Excluding sales of
these products, turnover grew 10%. The US business represented
49% of total pharmaceutical turnover in 2004.
Advair maintained its strong growth with sales of 1,330 million, up
20%. However, this adversely affected sales of its constituent
products, Flovent and Serevent, which both showed declines. Flonase,
indicated for the treatment of perennial rhinitis, grew by 9%.
Japan recorded turnover growth of 5%, despite routine government

price reductions being implemented in 2004. Paxil, up 25%, Serevent,
up 74% and Valtrex, up 16% performed particularly well, offsetting
small declines in Zantac and Zovirax.
Sales of Wellbutrin products fell 12% to 735 million. Wellbutrin IR

and SR sales fell 65% to 270 million as a result of generic
competition. The impact was partially offset, however, by the
exceptionally strong performance of Wellbutrin XL, the new oncedaily product, which achieved sales of 465 million in its first full year
on the market.
Across all markets in International, the key products driving growth

were Seretide, which grew 15% to record sales of 229 million,
Avandia/Avandamet, which grew 62% to 161 million and the
vaccines franchise, which recorded growth of 21% and achieved sales
of 405 million.
76
2004 Year
continued
Pharmaceutical turnover by therapeutic area 2004

Total
2003
Growth
m CER%
%
% of
total
2004
m
Respiratory
Seretide/Advair
Flixotide/Flovent
Serevent
Flixonase/Flonase
26
4,394
2,441
618
349
578
4,390
2,192
704
432
594

Seroxat/Paxil
Paxil IR
Paxil CR
Wellbutrin
Wellbutrin IR, SR
Wellbutrin XL
Imigran/Imitrex
20
3,462
1,063
667
396
751
284
467
682
4,446
(16) (22)
1,877
(39) (43)
1,490
(53) (55)
387
14
2
953
(12) (21)
883
(64) (68)
70 >100 >100
759
(2) (10)
Lamictal
Requip
7
19
(7)
(15)
7
11
(12)
(19)
(3)
USA
2004
Growth
m CER%
%
Europe
2004
Growth
m CER%
%
2,183
1,330
251
129
450
1,517
882
189
162
59
549
98
33
25
23
18
2,359
1,462
570
322
294
155
43
63
2,345
1,505
588
375
293
167
44
38
8
4
4
(8)
7
2
80
1
(3)
(3)
(14)
(7)
(2)
66
Herpes
Valtrex
Zovirax
718
571
147
668
498
170
15
24
(10)
7
15
(14)
380
369
11
Zeffix
130
129
14
(3)
8
(21)
(34)
(2)
2,271 (19) (27)

519 (51) (56)
131 (82) (84)
388
13
1
735 (12) (21)
270 (65) (69)
465 >100 >100
492
(2) (12)
677
116
Anti-virals
HIV
Combivir
Trizivir
Epivir
Ziagen
Retrovir
Agenerase, Lexiva
9
20
(12)
(26)
9
414
53
49
26
12
34
7
20
1
(6)
(7)
(19)
(7)
(15)
(11)
92
724
558
225
130
115
60
16
12
2
3
6
(8)
10
(1)
4
22
1
4
(9)
8
(2)
20
470
157
65
15
40
22
10
5
7
8
(1)
13
14
25
3
29
1
1
(7)
7
5
15
31
30
38
17
17
22
138
90
48
(5)
6
(21)
(6)
5
(23)
200
112
88
6
20
(7)
3
17
(11)
11
18
10
22
28
29
97
(5)
(9)
(9)
(5)
(39)
6
(7)
(14)
(14)
(9)
(45)
(5)
(12)
356
223
59
69
95
9
(24)
(21)
(15)
(42)
1
(52)
(32)
(29)
(21)
(48)
(10)
(59)
Metabolic
Avandia/Avandamet
1,251
1,114
1,077
929
27
32
16
20
852
852
26
26
Vaccines
Hepatitis
Infanrix, Pediarix
1,194
405
356
1,121
417
336
11
3
12
7
(3)
6
268
134
129
Oncology and emesis

Zofran
Hycamtin
934
763
99
1,000
774
110
2
8
(3)
(7)
(1)
(10)
679
565
64
Cardiovascular and
urogenital
Coreg
Levitra
Avodart
Other
Zantac
17,100 18,114
688
(6)
(7)
298
(9) (10)
293 (10) (11)
5 >100 >100
120
1
(1)
503
1
(6)
187
9
3
181
8
2
5 >100 100
1 >100 >100
76
(8) (15)
13
13
133
101
20
52
18
49
266
161
35
62
27
52
6
(5)
16
(5)
(15)
3
521
200
161
7
7
11
6
5
10
405
71
66
21
9
8
17
3
3
2
10
(7)
(9)
(2)
(17)
170
130
29
6
5
13
4
3
12
85
68
6
(5)
(2)
(19)
(10)
(7)
(25)
563
27
14
425
37
23
20
(14)
34 >100 >100
(7)
(12)
(12)
(17)
88
70
(6)
8,425
261
51
49
21
87
82
27 >100 >100
108
16
9
7 (43) (43)
8 >100
80
3 >100 >100
616
131
(1)
1
(11)
(9)
323
72
(10)
5,084
CER% represents turnover growth at constant exchange rates. % represents growth at actual exchange rates.
77
444
(7) (10)
293
(8) (11)
285 (10) (13)
8 >100 >100
15 (37) (40)
13 (44) (48)
2 >100 >100
48
(6)
(9)
45
7
1,800
825
584
135
106
232
100
12
21
(9)
12
22
1,547
708
533
74
101
205
1,165
328
4
15
3
24
(5)
13
22
1,027
273
747 (10) (11)

251 (31) (32)
251 (31) (32)
1 >100 >100
1 >100 >100
142
(1)
(3)
694
229
178
58
69
218
56
1,165
12
747
4
280
4
177 (10)
139
4
73
(5)
17
46 >100
770
31
21
361
34
20
37
41
32
19 >100 >100
4
17
(9)
(13)
5
33
13
Anti-bacterials
Augmentin
Augmentin IR
Augmentin ES
Augmentin XR
Zinnat/Ceftin
932
432
49
64
6
19
(7)
(13)
7
International
2004
Growth
m CER%
%
(5)
(21)
(8)
(21)
3,591
(8)
(13)
(14)
(17)
(2)
Therapeutic area/
major products
2004 Year
continued
Consumer Healthcare sales
OTC medicines
Analgesics
Dermatological
Gastro-intestinal
Respiratory tract
Smoking control
Oral care
Operating profit
2004
m
2003
m
Growth
CER% %
1,400
333
180
241
145
327
136
1,472
328
225
267
144
315
148
913
573
915
569
4
4
2,886
2,956
(2)
The analysis below of operating profit and subsequent discussion

compares the 2004 results with 2003 results.
2 (5)
7
2
(15) (20)
(2) (10)
3
1
13
4
(2) (8)
2004
m
Turnover
Cost of sales
Selling, general
and administration
Research and
development
Other operating
income
Operating profit
The growth in Consumer Healthcare sales of 3% to 2.9 billion

comprised an OTC medicines sales increase of 2%, Oral care sales
increase of 4% and a Nutritional healthcare sales increase of 4%.
2003
Growth
CER%
21,070 100.0
(5)
(4,360) (21.8)
(4,577) (21.7)
(5)
(7,201) (36.0)
(7,888) (37.4)
(5)
(9)
(2,904) (14.5)
(2,865) (13.6)
(5)
19,986 100.0
235
1.1
310
1.4
5,756
28.8
6,050
28.7
Cost of sales
Cost of sales as a percentage of turnover remained broadly in line
with the prior year as reduced merger and manufacturing
restructuring costs were offset by a significant weakening of the US
dollar relative to 2003, the loss of higher margin Paxil IR and Wellbutrin
SR sales to generics, and an adverse product mix. Merger and
manufacturing restructuring costs were nil in 2004 but 356 million
in 2003.
OTC medicines
OTC medicine sales were 1.4 billion, up 2%. Sales growth from
smoking control products in the USA, up 11%, and Europe, up 22%,
helped to offset the decline in dermatological products, which were
down 15% due to generic competition to Cutivate in the USA.
Expansion of the Panadol brand in International markets helped
analgesics grow 7%.

Selling, general and administration (SG&A) costs declined 5% (9%
decline in sterling terms) reflecting savings in general and
administration that were partly offset by increased advertising,
promotion and selling costs. These latter costs increased 1%, and
accounted for a one percentage point increase in total SG&A.
General and administration costs declined 14% and accounted for
a six percentage point reduction in total SG&A. This was due to lower
charges related to programmes to deliver future cost savings (equal
to a two percentage point reduction in total SG&A) and other general
expense reductions (equal to a four percentage point decline in total
SG&A). Net of currency movements, there was an overall reduction
of 1.4 percentage points relative to 2003 for expenses expressed as
a percentage of turnover.
In July, GSK obtained the OTC marketing rights in the USA for orlistat,
an FDA-approved prescription product for obesity management
marketed by Roche as Xenical.
Oral care
Oral care sales were 0.9 billion, up 4%. Strong growth in
International of 8% was led by the Sensodyne, Polident and Poligrip
brands.
Sales of Nutritional healthcare products grew 4% to 0.6 billion.
Lucozade grew 6% to 237 million.

R&D expenditure increased 8% reflecting increased clinical trial
activity. Pharmaceuticals R&D expenditure represented 16.4% of
pharmaceutical turnover in the year.
Other operating income includes royalty income, equity investment
disposals and impairments and product disposals. Other operating
income was 235 million in 2004 compared with 310 million in
2003 reflecting lower product and asset disposals.
78
2004 Year
continued
Share of after tax profits/(losses) of associates and joint

ventures
The share of profits of associates arises principally from the Groups
holding in Quest Diagnostics Inc.
Finance income
2004
m
2003
m
Interest income
173
3
98
3
176
101
2004
m
2003
m
(346)
(16)
(234)
(20)
(362)
(254)
Interest costs
Unwinding of discount on provisions
2003
m
UK corporation tax
Overseas taxation
273
1,394
383
1,578
Current taxation
Deferred taxation
1,667
90
1,961
(310)
Total
1,757
1,651
The charge for taxation on profit, amounting to 1,757 million,

represents an effective tax rate of 30.4% (2003 27.7%).
Disposal of interest in associates

During 2004, the Group disposed of 3.8 million shares from its
investment in Quest Diagnostics Inc. for cash proceeds of 188 million,
reducing the Groups shareholding at 31st December 2004 to 18.6%.
After recognising a charge of 17 million for goodwill previously
written off to reserves a profit of 139 million was recognised.
Finance costs
2004
m
The integrated nature of the Groups worldwide operations, involving

significant investment in research and strategic manufacture at a
limited number of locations, with consequential cross-border supply
routes into numerous end-markets, gives rise to complexity and delay
in negotiations with revenue authorities as to the profits on which
individual Group companies are liable to tax. Disagreements with,
and between, revenue authorities as to intra-Group transactions, in
particular the price at which goods should be transferred between
Group companies in different tax jurisdictions, can produce
conflicting claims from revenue authorities as to the profits to be
taxed in individual territories. Resolution of such issues is a continuing
fact of life for GSK. The Group has open issues with the revenue
authorities in the USA, UK, Japan and Canada. By far the largest
relates to Glaxo heritage products, in respect of which the US Internal
Revenue Service (IRS) and UK Inland Revenue have made competing
and contradictory claims.
For the latest position on taxation see Taxation in the 2005 Year
Operating and Financial review and prospects on page 63.

Taking account of finance income and finance costs, the contribution
from associates and business disposals, profit before tax was 5,779
million compared with 5,954 million in 2003, an increase of 9%
(3% decline in sterling terms).
79
Taxation
Operating profit
Overall the operating profit margin increased 0.1 percentage points
as operating profit of 5,756 million declined 5% in sterling terms on
a turnover decline of 5%. At constant exchange rates operating profit
increased 6%, reflecting the completion of the merger and
manufacturing restructuring programme in 2003 and lower charges
relating to programmes to deliver future cost savings, partly offset by
increased R&D expenditure and lower product and asset disposals.
2004 Year
continued
Profit for the year

Profit attributable to
shareholders
Earnings per ADS (US $)
2004
m
2003
m
4,022
4,308
3,908 4,201
68.1p 72.3p
$2.49 $2.37
5,736
Growth
CER% %
(7)
4
6
6
(7)
(6)
(6)
5,806
Diluted earnings per share (pence) 68.0p 72.1p

Diluted earnings per ADS (US $) $2.49 $2.36
5,748 5,824
Profit for the year was 4,022 million, an increase of 4% (7% decline
in sterling terms). Net of profits attributable to minority interests, profit
attributable to shareholders was 3,908 million, an increase of 4%
(7% decline in sterling terms).
EPS in 2004 was 68.1 pence compared with 72.3 pence in 2003. The
sterling based decline in EPS of 6% reflected the significant
weakening of the dollar. Excluding the effects of currency, statutory
EPS grew 6% reflecting the completion of the Groups merger and
restructuring programmes in 2003 as well as underlying business
growth, partly offset by a higher tax rate.
Dividend
The Board declared a fourth interim dividend of 12 pence per share
making a total for the year of 42 pence per share. This compared
with a total dividend of 41 pence per share for 2003.
80
82
83
84
85
86
88

1. Presentation of the financial statements
2. Accounting policies
3. New accounting policies and future requirements
4. Exchange rates
5. Segment information
6. Other operating income
7. Operating profit
8. Employee costs
9. Finance income
10. Finance costs
11. Associates and joint ventures
12. Taxation
13. Earnings per share
14. Dividends
15. Property, plant and equipment
16. Goodwill
17. Other intangible assets
18. Investments in associates and joint ventures
19. Other investments
20. Other non-current assets
21. Inventories
22. Trade and other receivables
23. Cash and cash equivalents
24. Assets held for sale
25. Trade and other payables
26. Pensions and other post-employment benefits
27. Other provisions
28. Other non-current liabilities
29. Contingent liabilities
30. Net debt
31. Share capital and share premium account
32. Movements in equity
33. Related party transactions
34. Acquisitions and disposals
35. Commitments
36. Financial instruments and related disclosures
37. Employee share schemes
38. Reconciliation to US accounting principles
39. Principal Group companies
40. Transition to IFRS
41. Legal proceedings
89
89
92
92
93
95
95
96
97
97
97
97
100
100
101
102
103
104
105
105
105
106
106
106
106
107
113
113
114
114
116
117
118
119
122
123
132
135
147
150
157
Balance sheet of GlaxoSmithKline plc, prepared

under UK GAAP
165
81
FINANCIAL STATEMENTS
This section comprises the Directors statements of responsibility, the

Independent Auditors report on the financial statements and the
consolidated financial statements consisting of the principal financial
statements and supporting notes prepared under IFRS as adopted for
use in the European Union. Also presented is the balance sheet of
GlaxoSmithKline plc, which has been prepared under UK GAAP.

Directors statement of responsibility in relation to
the consolidated financial statements
Internal control
The Board, through the Audit Committee, has reviewed the
assessment of risks and the internal control framework that operates
in GlaxoSmithKline and has considered the effectiveness of the system
of internal control in operation in the Group for the year covered by
this report and up to the date of its approval by the Board of Directors.
The Directors are responsible for:

ensuring the maintenance of proper accounting records, which
disclose with reasonable accuracy the financial position of the Group
at any time and from which financial statements can be prepared
to comply with the Companies Act 1985 and Article 4 of the IAS
Regulation
The Combined Code

The Board considers that GlaxoSmithKline plc applies the principles of
the Combined Code on Corporate Governance of the Financial
Reporting Council, as described under Corporate governance on
pages 27 to 36, and has complied with its provisions except as
described on pages 35 and 36.
preparing financial statements for each financial period which give

a true and fair view, in accordance with IFRS as adopted for use in
the European Union, of the state of affairs of the Group as at the
end of the financial period and of the profit or loss for that period
ensuring the operation of systems of internal control and for taking
reasonable steps to safeguard the assets of the Group and for
preventing and detecting fraud and other irregularities.
As required by the Listing Rules of the Financial Services Authority, the

auditors have considered the Directors statement of compliance in
relation to those points of the Combined Code which are specified
for their review.
The financial statements for the year ended 31st December 2005,
comprising principal statements and supporting notes, are set out
in Financial statements on pages 84 to 164 of this report.
Annual Report
The Directors confirm that suitable accounting policies have been

consistently applied in the preparation of the financial statements,
supported by reasonable and prudent judgements and estimates
as necessary.
The Annual Report for the year ended 31st December 2005,
comprising the Report of the Directors, the Remuneration Report, the
Financial statements and additional information for investors, has
been approved by the Board of Directors and signed on its behalf by
The responsibilities of the auditors in relation to the financial

statements are set out in the Independent Auditors report (page 83
opposite).
The financial statements for the year ended 31st December 2005 are
included in the Annual Report 2005, which is published in hard-copy
printed form and made available on the website. The Directors are
responsible for the maintenance and integrity of the Annual Report
on the website in accordance with UK legislation governing the
preparation and dissemination of financial statements. Access to the
website is available from outside the UK, where comparable legislation
may be different.

Chairman
1st March 2006
Directors remuneration
remuneration policies operated by GlaxoSmithKline and disclosures on
Directors remuneration and other disclosable information relating to
Directors and officers and their interests. It has been prepared in
accordance with the Companies Act 1985 and complies with Section
B of the Combined Code on Corporate Governance.
Going concern basis

After making enquiries, the Directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. For this reason, they
continue to adopt the going concern basis in preparing the financial
statements.
82

to the members of GlaxoSmithKline plc
Basis of audit opinion
We have audited the group financial statements of GlaxoSmithKline

plc for the year ended 31st December 2005 which comprise the
consolidated balance sheet, consolidated income statement,
consolidated cash flow statement, consolidated statement of
recognised income and expense and the related notes. These group
financial statements have been prepared under the accounting policies
set out therein.
We conducted our audit in accordance with International Standards

on Auditing (UK and Ireland) issued by the Auditing Practices Board.
An audit includes examination, on a test basis, of evidence relevant
to the amounts and disclosures in the group financial statements. It
also includes an assessment of the significant estimates and
judgments made by the directors in the preparation of the group
financial statements, and of whether the accounting policies are
appropriate to the groups circumstances, consistently applied and
adequately disclosed.
We have reported separately on the parent company financial

statements of GlaxoSmithKline plc for the year ended 31st December
2005 and on the information in the Directors Remuneration Report
that is described as having been audited.
We planned and performed our audit so as to obtain all the

information and explanations which we considered necessary in order
to provide us with sufficient evidence to give reasonable assurance
that the group financial statements are free from material
misstatement, whether caused by fraud or other irregularity or error.
In forming our opinion we also evaluated the overall adequacy of the
presentation of information in the group financial statements.
Respective responsibilities of directors and

auditors
The directors responsibilities for preparing the Annual Report and
the group financial statements in accordance with applicable law and
International Financial Reporting Standards (IFRSs) as adopted by the
European Union are set out in the Directors statements of
responsibility.
Opinion
Our responsibility is to audit the group financial statements in

accordance with relevant legal and regulatory requirements and
International Standards on Auditing (UK and Ireland). This report,
including the opinion, has been prepared for and only for the
companys members as a body in accordance with Section 235 of the
Companies Act 1985 and for no other purpose. We do not, in giving
this opinion, accept or assume responsibility for any other purpose or
to any other person to whom this report is shown or into whose
hands it may come save where expressly agreed by our prior consent
in writing.
In our opinion:
the group financial statements give a true and fair view, in
accordance with IFRSs as adopted by the European Union, of the
state of the groups affairs as at 31st December 2005 and of its
profit and cash flows for the year then ended; and
Separate opinion in relation to IFRSs
We report to you our opinion as to whether the group financial

statements give a true and fair view and whether the group financial
statements have been properly prepared in accordance with the
Companies Act 1985 and Article 4 of the IAS Regulation. We also
report to you if, in our opinion, the Directors Report is not consistent
with the group financial statements, if we have not received all the
information and explanations we require for our audit, or if
information specified by law regarding directors remuneration and
other transactions is not disclosed.
As explained in Note 1 to the group financial statements, the group

in addition to complying with its legal obligation to comply with IFRSs
as adopted by the European Union, has also complied with the IFRSs
as issued by the International Accounting Standards Board.
In our opinion the group financial statements give a true and fair view,
in accordance with IFRSs, of the state of the groups affairs as at 31st
December 2005 and of its profit and cash flows for the year then
ended.
We review whether the Corporate Governance Statement reflects

the companys compliance with the nine provisions of the 2003 FRC
Combined Code specified for our review by the Listing Rules of the
Financial Services Authority, and we report if it does not. We are not
required to consider whether the boards statements on internal
control cover all risks and controls, or form an opinion on the
effectiveness of the groups corporate governance procedures or its
risk and control procedures.
PricewaterhouseCoopers LLP
Chartered Accountants and Registered Auditors
London
1st March 2006
We read other information contained in the Annual Report and

consider whether it is consistent with the audited group financial
statements. The other information comprises only the joint statement
by the Chairman and Chief Executive, the financial summary,
description of business, the corporate governance statement and the
operating and financial review and prospects. We consider the
implications for our report if we become aware of any apparent
misstatements or material inconsistencies with the group financial
statements. Our responsibilities do not extend to any other information.
83
the group financial statements have been properly prepared in

accordance with the Companies Act 1985 and Article 4 of the IAS
Regulation.

for the year ended 31st December 2005
Notes
Turnover
Cost of sales
2005
m
2004
m
2003
m
21,660
(4,764)
19,986
(4,360)
21,070
(4,577)
16,896
(7,250)
(3,136)
364
15,626
(7,201)
(2,904)
235
16,493
(7,888)
(2,865)
310
6,874
5,756
6,050
176
(362)
60
149
101
(254)
57
6,732
5,779
5,954
(1,916)
(1,757)
(1,651)
5
4,816
4,022
4,308

127
4,689
114
3,908
107
4,201
4,816
4,022
4,308
Gross profit
Operating profit
7,8
Finance income
Finance costs
Share of after tax profits of associates and joint ventures
Profit on disposal of interest in associates
9
10
11
34

Taxation
Profit on disposal of businesses
12
13
13
Basic earnings per share (pence)

84
257
(451)
52
82.6p
82.0p
68.1p
68.0p
72.3p
72.1p

Notes
2005
m
2004
m
15
16
17
18
19
12
20
6,652
696
3,383
276
362
2,214
438
6,197
304
2,513
209
298
2,032
611
14,021
12,164
2,177
416
5,348
1,025
4,209
2
2,193
155
4,451
1,512
2,467
2
13,177
10,780
Total assets
27,198
22,944
(1,200)
(5,147)
(2,269)
(895)
(1,582)
(4,267)
(1,753)
(962)
(9,511)
(8,564)
(5,271)
(569)
(3,069)
(741)
(467)
(4,381)
(569)
(2,519)
(569)
(405)
Non-current assets
Goodwill
Investments in associates and joint ventures
Other investments
Deferred tax assets
Current assets
Inventories
Liquid investments
21
12
22
30
23
24
Current liabilities
Current tax payable
30
25
12
27

Other provisions
30
12
26
27
28
(10,117)
(8,443)
Total liabilities
(19,628)
(17,007)
7,570
5,937
1,491
549
5,579
(308)
1,484
304
4,542
(606)
7,311
5,724
Net assets
Equity
Share capital
Retained earnings
Other reserves
31
31
32
32
Shareholders equity
Minority interests
Total equity
Approved by the Board on 1st March 2006

Chairman
85
259
213
7,570
5,937
at 31st December 2005

Notes
2004
m
2003
m
Cash flows from operating activities

Cash generated from operations
Taxation paid
7,665
(1,707)
6,527
(1,583)
7,005
(1,917)
5,958
4,944
5,088
(903)
54
221
(278)
(23)
35
(36)
(1,026)
(2)
(2)
290
10
(788)
53
(255)
(103)
58
(297)
230
(2)
173
11
(746)
46
(316)
(63)
125
(12)
3
(3)
104
1
Net cash outflow from investing activities
(1,660)
(920)
(861)
Cash flow from financing activities

Decrease/(increase) in liquid investments
Proceeds from own shares for employee share options
Issue of share capital
Share capital purchased for cancellation
Purchase of Treasury shares
Redemption of preference shares issued by subsidiary
Increase in long-term loans
Repayment of long-term loans
Net repayment of obligations under finance leases
Interest paid
Dividends paid to shareholders
Dividends paid to minority interests
Dividends paid on preference shares
Other financing cash flows
550
68
252
(999)
982
(70)
(857)
(36)
(381)
(2,390)
(86)
53
(53)
23
42
(201)
(799)
(489)
1,365
(15)
(407)
(22)
(350)
(2,475)
(73)
(2)
49
(373)
26
41
(980)
1,046
(23)
(442)
(236)
(2,333)
(84)
(15)
82
(2,914)
(3,407)
(3,291)
Cash flow from investing activities

Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Proceeds from sale of intangible assets
Purchase of intangible assets
Purchase of equity investments
Proceeds from sale of equity investments
Share transactions with minority shareholders
Purchase of businesses, net of cash acquired
Disposal of businesses and interest in associates
Interest received
Dividends from associates and joint ventures
2005
m
34
34
34
34
31
Net cash outflow from financing activities

1,384
617
936
Cash and bank overdrafts at beginning of year
233
2,355
(93)
1,831
(110)
1,005
3,972
2,355
1,831
Cash and bank overdrafts at end of year comprise:

Overdrafts
4,209
(237)
2,467
(112)
1,986
(155)
3,972
2,355
1,831
86
Supplementary information on cash flow

Reconciliation of operating profit to operating cash flows

Notes
Operating profit
Adjustments:
Depreciation
Impairment and assets written off
Amortisation of intangible assets
(Profit)/loss on sale of property, plant and equipment
(Profit)/loss on sales of intangible assets
Profit on sale of equity investments
Fair value loss on inventory sold
Changes in working capital:
Decrease/(increase) in inventories
Increase in trade and other receivables
Increase/(decrease) in trade and other payables
(Decrease)/increase in pension and other provisions
Share-based incentive plans
Other
2005
m
2004
m
2003
m
6,874
5,756
6,050
710
193
194
(19)
(203)
(15)
691
94
168
2
1
(33)
13
704
255
127
(7)
(89)
47
(397)
491
(453)
236
7
(33)
(235)
163
(351)
333
(42)
(76)
(369)
(74)
71
375
38
7,665
6,527
7,005
(1,984)
13
1,384
(550)
(912)
857
36
(68)
39
(52)
(1,648)
617
53
(1,350)
407
22
24
(109)
(2,335)
936
373
(1,023)
442
(37)
(4)
Net debt at beginning of year

Implementation of accounting for financial instruments under IAS 39
Cash (inflow)/outflow from liquid investments
Net increase in long-term loans
Net repayment of obligations under finance leases
Net non-cash funds of subsidiary undertakings acquired
Other non-cash movements
Movement in net debt
747
Net debt at end of year
30
At 31.12.04
as previously
reported
m
Adjusted
for IAS 39
m
Liquid investments
1,512
1,515

Overdrafts
2,467
(112)
2,467
(112)
2,355
2,355
(830)
(552)
(88)
(1,470)
Debt due after one year:
Eurobonds, Medium-Term Notes and
private financing
Other
(4,302)
(79)
(4,381)
Net debt
(1,984)
Analysis of changes in net debt
Debt due within one year:

Commercial paper
Eurobonds and Medium-Term Notes
Other
At 1.1.05
m
Exchange
m
(1,237)
(336)
687
(1,984)
(1,648)
Other
m
Acquisitions
m
15
45
(550)
1,025
235
(2)
(2)
1,509
(123)
4,209
(237)
233
(2)
1,386
3,972
(830)
(549)
(88)
(3)
(13)
(294)
(46)
254
555
51
(576)
(291)
(96)
(1,467)
(16)
(294)
(46)
860
(963)
(4,295)
(79)
(192)
(1)
301
(59)
(67)
(974)
95
(5,160)
(111)
(4,374)
(193)
242
(67)
(879)
(5,271)
13
(1,971)
39
(52)
(70)
817
(1,237)
For further information on significant changes in net debt see Note 30 Net debt.
87
Cash flow
m
At 31.12.05
m
Reconciliation of net cash flow to movement in net debt

2005
m
2004
m
2003
m
203
99
(1)
(10)
9
(794)
257
(4)
1
(47)
(73)
6
108
(17)
53
(90)
(7)
(432)
121
Net losses recognised directly in equity

Profit for the year
(240)
4,816
(23)
4,022
(355)
4,308
Total recognised income and expense for the year

Implementation of accounting for financial instruments under IAS 39
4,576
(12)
3,999
3,953
Total recognised income and expense
4,564
Total recognised income and expense for the year attributable to:
Shareholders
Minority interests
4,423
153
3,906
93
3,919
34
4,576
3,999
3,953
Exchange movements on overseas net assets

Tax on exchange movements
Fair value movements on available-for-sale investments
Deferred tax on fair value movements
Revaluation of goodwill due to exchange
Actuarial (losses)/gains on defined benefit plans
Deferred tax on actuarial movements in defined benefit plans
Fair value movements on cash flow hedges
Deferred tax on fair value movements on cash flow hedge
Implementation of accounting for financial instruments under IAS 39 attributable to:

Shareholders
Minority interests
(16)
4
(12)
88

1 Presentation of the financial statements
The financial statements have been prepared in accordance with the

Groups accounting policies approved by the Board and described in
Note 2.
GlaxoSmithKline is a major global healthcare group which is engaged
in the creation and discovery, development, manufacture and
marketing of pharmaceutical products, including vaccines, over-thecounter (OTC) medicines and health-related consumer products.
GlaxoSmithKlines principal pharmaceutical products include
medicines in the following therapeutic areas: central nervous system,
respiratory, anti-virals, anti-bacterials, vaccines, oncology and emesis,
metabolic, cardiovascular and urogenital.
Conversion to IFRS
This is the first year that GlaxoSmithKline has produced financial
statements under IFRS. The adoption of IFRS has resulted in a number
of significant adjustments to the previously reported results and equity
shareholders funds presented under UK generally accepted
accounting principles (UK GAAP). The main changes were in relation
to share-based payments, pensions, intangible assets, deferred
taxation and financial instruments.
Compliance with applicable law and IFRS

The financial statements have been prepared in accordance with the
Companies Act 1985, Article 4 of the IAS Regulation and
International Accounting Standards (IAS) and International Financial
Reporting Standards (IFRS) and related interpretations, as adopted for
use in the European Union.
IFRS 1, First-Time Adoption of international Financial Reporting

Standards, permits those companies adopting IFRS for the first time
to take some exemptions from the full requirements of IFRS in the
transition period. GlaxoSmithKline has adopted the following key
exemptions:
Business combinations: Business combinations prior to the transition
date (1st January 2003) have not been restated onto an IFRS basis
For GSK, there are no differences between IFRS as adopted for use in
the European Union and full IFRS as published by the International
Accounting Standards Board.
Share-based payments: IFRS 2, Share-based Payment, applies to

equity instruments, such as share options granted since 7th
November 2002, but GlaxoSmithKline has elected to adopt full
retrospective application of the standard
Financial period
These financial statements cover the financial year from 1st January
to 31st December 2005, with comparative figures for the financial
years from 1st January to 31st December 2004 and from 1st January
to 31st December 2003.
Composition of the Group
A list of the subsidiary and associated undertakings which, in the opinion
of the Directors, principally affected the amount of profit or the net
assets of the Group is given in Principal Group companies, Note 39.
See Note 40 for further details.
Composition of financial statements

The consolidated financial statements are drawn up in accordance
with IFRS and with IFRS accounting presentation. The financial
statements comprise:
Parent company financial statements

The financial statements of the parent company, GlaxoSmithKline
plc, have been prepared in accordance with UK GAAP and with UK
accounting presentation. The company balance sheet is presented on
page 167.

Notes to the financial statements.
2 Accounting policies
Consolidation
The consolidated financial statements include:
Additional information in accordance with the requirements of

US generally accepted accounting principles (US GAAP) is included in
the notes to the financial statements. In Note 38 a statement of
differences, and reconciliations of net income and shareholders
equity, between IFRS and US GAAP are provided.
the assets and liabilities, and the results and cash flows, of the
company and its subsidiaries, including ESOP Trusts
the Groups share of the net assets and results of associates and
joint ventures.
Accounting convention
The financial statements have been prepared using the historical cost
convention, modified for certain items carried at fair value, as stated
in the accounting policies.
The financial statements of entities consolidated are made up to 31st

December.
Entities over which the Group has the ability to exercise control are
accounted for as subsidiaries; where the Group has the ability to
exercise joint control, they are accounted for as joint ventures; and
where the Group has the ability to exercise significant influence, they
are accounted for as associates.
Accounting principles and policies

The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Interests acquired in entities are consolidated from the effective date

of acquisition and interests sold are consolidated up to the date of
disposal.
89
Financial instruments: Financial instruments in the comparative

periods presented in the Annual Report 2005 (i.e. 2004 and 2003)
are recorded on the UK GAAP basis applicable in those years, rather
than in accordance with IAS 32 Financial Instruments: Disclosure
and Presentation and IAS 39 Financial Instruments: Recognition
and Measurement.

continued
2 Accounting policies continued
Expenditure
Expenditure is recognised in respect of goods and services received
when supplied in accordance with contractual terms. Provision is
made when an obligation exists for a future liability in respect of a past
event and where the amount of the obligation can be reliably
estimated. Advertising and promotion expenditure is charged to the
income statement as incurred. Shipment costs on intercompany
transfers are charged to cost of sales; distribution costs on sales to
customers are included in selling, general and administrative
expenditure. Restructuring costs are recognised in respect of the direct
expenditure of a business reorganisation where the plans are
sufficiently detailed and well advanced, and where appropriate
communication to those affected has been undertaken.
Transactions and balances between subsidiaries are eliminated; no

profit before tax is taken on sales between subsidiaries or on sales to
joint ventures and associates until the products are sold to customers
outside the Group. Deferred tax relief on unrealised intra-Group profit
is accounted for only to the extent that it is considered recoverable.
Goodwill arising on the acquisition of interests in subsidiaries, joint
ventures and associates, representing the excess of the purchase
consideration over the Groups share of the fair values of the
identifiable assets, liabilities and contingent liabilities acquired, is
capitalised as a separate item in the case of subsidiaries and as part
of the cost of investment in the case of joint ventures and associates.
Goodwill is denominated in the currency of the operation acquired.
In the case of acquisitions prior to 1998, goodwill was written off
directly to equity; on a subsequent disposal of assets from such
acquisitions, any related goodwill remains in equity and is not charged
to the consolidated income statement. Business combinations have
not been restated in 2004 and 2003.

Research and development expenditure is charged to the income
statement in the period in which it is incurred. Development
expenditure is capitalised when the criteria for recognising an asset
are met, usually when a regulatory filing has been made in a major
market and approval is considered highly probable. Property, plant
and equipment used for research and development is depreciated in
accordance with the Groups policy.
The results and assets and liabilities of associates and joint ventures
are incorporated into the consolidated financial statements using the
equity method of accounting.
Environmental expenditure
Environmental expenditure related to existing conditions resulting
from past or current operations and from which no current or future
benefit is discernible is charged to the income statement. The Group
recognises its liability on a site-by-site basis when it can be reliably
estimated. This liability includes the Groups portion of the total costs
and also a portion of other potentially responsible parties costs when
it is probable that they will not be able to satisfy their respective shares
of the clean-up obligation. Recoveries of reimbursements are recorded
as assets when virtually certain.
Assets and liabilities, including related goodwill, of overseas

subsidiaries, associates and joint ventures, are translated into sterling
at rates of exchange ruling at the balance sheet date. The results and
cash flows of overseas subsidiaries, associates and joint ventures are
translated into sterling using average rates of exchange. Exchange
adjustments arising when the opening net assets and the profits for
the year retained by overseas subsidiaries, associates and joint ventures
are translated into sterling, less exchange differences arising on related
foreign currency borrowings which hedge the Groups net investment
in these operations, are taken to a separate component of equity.

The costs of providing pensions under defined benefit schemes are
calculated using the projected unit credit method and spread over
the period during which benefit is expected to be derived from the
employees services, in accordance with the advice of qualified
actuaries. Pension obligations are measured as the present value of
estimated future cash flows discounted at rates reflecting the yields
of high quality corporate bonds.
When translating into sterling the assets, liabilities, results and cash
flows of overseas subsidiaries, associates and joint ventures which are
reported in currencies of hyper-inflationary economies, adjustments
are made to reflect current price levels. Any loss on net monetary
assets is charged to the consolidated income statement.
Foreign currency transactions

Foreign currency transactions by Group companies are booked in local
currency at the exchange rate ruling on the date of transaction.
Foreign currency assets and liabilities are retranslated into local
currency at rates of exchange ruling at the balance sheet date.
Exchange differences are included in the income statement.
Pension scheme assets are measured at fair value at the balance sheet
date. Actuarial gains and losses, differences between the expected
and actual returns, and the effect of changes in actuarial assumptions
are recognised in the statement of recognised income and expense
in the year in which they arise. The Groups contributions to defined
contribution plans are charged to the income statement as incurred.
Revenue
Revenue is recognised in the income statement when goods or
services are supplied or made available to external customers against
orders received and when title and risk of loss passes to the customer.
Turnover represents net invoice value after the deduction of discounts
and allowances given and accruals for estimated future rebates and
returns. The methodology and assumptions used to estimate rebates
and returns are monitored and adjusted regularly in the light of
contractual and historical information and past experience. Turnover
also includes co-promotion income where the Group records its share
of the revenue but no related cost of sales. Value added tax and other
sales taxes are excluded from revenue.
The costs of other post-employment liabilities are calculated in a similar

way to defined benefit pension schemes and spread over the period
during which benefit is expected to be derived from the employees
services, in accordance with the advice of qualified actuaries.

Provision is made for anticipated settlement costs where a reasonable
estimate can be made of the likely outcome of legal or other disputes
against the Group. In addition, provision is made for legal or other
expenses arising from claims received or other disputes.
90

continued
Goodwill
Goodwill is stated at cost less impairments. Goodwill is deemed to
have an indefinite useful life and is tested for impairment annually.
In respect of product liability claims related to products where there

is sufficient history of claims made and settlements, an incurred but
not reported (IBNR) actuarial technique is used to determine a
reasonable estimate of the Groups exposure to unasserted claims for
those products and a provision is made on that basis.
Where the fair value of the interest acquired in an entitys assets,

liabilities and contingent liabilities exceeds the consideration paid, this
excess is recognised immediately as a gain in the income statement.
Intangible assets
Intangible assets are stated at cost less provisions for amortisation and
impairments.
No provision is made for other unasserted claims or where an

obligation exists under a dispute but it is not possible to make a
reasonable estimate. Costs associated with claims made by the Group
against third parties are charged to the income statement as they are
incurred.
Licences, patents, know-how and marketing rights separately

acquired or acquired as part of a business combination are amortised
over their estimated useful lives from the time they are available for
use. The estimated useful lives for determining the amortisation
charge are reviewed annually, and take into account the estimated
time it takes to bring the compounds or products to market.
Any development costs incurred by the Group and associated with
acquired licences, patents, know-how or marketing rights are written
off to the income statement when incurred, unless the criteria for
recognition of an internally generated intangible asset are met.
Employee share plans

Incentives in the form of shares are provided to employees under
share option and share award schemes. These options and awards are
fair valued at their grant dates and the cost is charged to the income
statement over the relevant vesting periods. This has been applied on
a fully retrospective basis.
The Group provides finance to ESOP Trusts to purchase company
shares on the open market to meet the obligation to provide shares
when employees exercise their options or awards. Costs of running
the ESOP Trusts are charged to the income statement. Shares held by
the ESOP Trusts are deducted from other reserves and held at the
value of the proceeds receivable from employees on exercise. If there
is deemed to be a permanent impairment in value this is reflected by
a transfer to retained earnings.
Brands are valued independently as part of the fair value of businesses

acquired from third parties where the brand has a value which is
substantial and long-term and where the brands can be sold
separately from the rest of the businesses acquired. Brands
are amortised over their estimated useful lives, except where it is
considered that the useful economic life is indefinite.
The costs of acquiring and developing computer software for internal

use and internet sites for external use are capitalised as intangible
fixed assets where the software or site supports a significant business
system and the expenditure leads to the creation of a durable asset.
ERP systems software is amortised over seven years and other
computer software over three to five years.
Depreciation is calculated to write off the cost of PP&E, excluding

freehold land, using the straight-line basis over its expected useful
life. The normal expected useful lives of the major categories of PP&E
are reviewed annually and are:
Freehold buildings
Leasehold land and
buildings
Plant and machinery
Fixtures and equipment
20 to 50 years
Lease term or 20 to 50 years
Impairment of non-current assets

The carrying values of all non-current assets are reviewed for
impairment when there is an indication that the assets might be
impaired. Additionally, goodwill, intangible assets with indefinite
useful lives and intangible assets which are not yet available for use
are tested for impairment annually. Any provision for impairment is
charged to the income statement in the year concerned.
10 to 20 years
3 to 10 years
On disposal of PP&E, the cost and related accumulated depreciation

and impairments are removed from the financial statements and the
net amount, less any proceeds, is taken to the income statement.

Investments in associates and joint ventures are carried in the
consolidated balance sheet at the Groups share of their net assets at
date of acquisition and of their post-acquisition retained profits or
losses together with any goodwill arising on the acquisition.
Leases
Leasing agreements which transfer to the Group substantially all the
benefits and risks of ownership of an asset are treated as finance
leases, as if the asset had been purchased outright. The assets are
included in PP&E or computer software and the capital elements of
the leasing commitments are shown as obligations under finance
leases. Assets held under finance leases are depreciated on a basis
consistent with similar owned assets or the lease term if shorter. The
interest element of the lease rental is included in the income
statement. All other leases are operating leases and the annual rentals
are included in the income statement on a straight-line basis over the
lease term.
Available-for-sale investments
Available-for-sale investments are initially recorded at cost and then
remeasured at subsequent reporting dates to fair value. Unrealised
gains and losses on available-for-sale investments are recognised
directly in equity. On disposal or impairment of the investments, the
gains and losses in equity are recycled into the income statement.
Equity investments are recorded in non-current assets unless they are
expected to be sold within one year.
91
Prior to 1998, acquired minor brands and similar intangibles were

eliminated in the Group balance sheet against reserves in the year of
acquisition.

Property, plant and equipment (PP&E) is stated at the cost of purchase
or construction less provisions for depreciation and impairment.
Financing costs are not capitalised.

continued
Derivative financial instruments and hedging (2004 and 2003)

IAS 32 and 39 were adopted by the Group on 1st January 2005. The
2004 and 2003 information relating to financial instruments remains
as reported under UK GAAP and applying the following policies.
Purchases and sales of equity investments are accounted for on the

trade date and purchases and sales of other available-for-sale
investments are accounted for on settlement date.
Derivative contracts are treated from inception as an economic hedge

of the underlying financial instrument with matching accounting
treatment and cash flows. Derivative instruments no longer
designated as hedges are restated at market value and any future
changes in value are taken directly to the profit and loss account.
In 2004 and 2003 equity investments are recorded at cost.
Inventories
Inventories are included in the financial statements at the lower of cost
(including raw materials, direct labour, other direct costs and related
production overheads) and net realisable value. Cost is generally
determined on a first in, first out basis.
Currency swaps and forward exchange contracts used to fix the value
of the related asset or liability in the contract currency and at the
contract rate are accrued to the profit and loss account over the life
of the contract.
Taxation
Current tax is provided at the amounts expected to be paid applying
tax rates that have been enacted or substantially enacted by the
balance sheet date.
Gains and losses on foreign exchange contracts designated as hedges

of forecast foreign exchange transactions are deferred and included
in the measurement of the related foreign currency transactions in the
period they occur. Gains and losses on balance sheet hedges are
accrued and are taken directly to reserves except that forward
premiums/discounts are recognised as interest over the life of the
contracts.
Deferred tax is provided in full, using the liability method, on

temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the financial statements.
Deferred tax assets are recognised to the extent that it is probable that
future taxable profits will be available against which the temporary
differences can be utilised.
Interest differentials under interest swap agreements are recognised

in the profit and loss account by adjustment of interest expense over
the life of the agreement.
Deferred tax is provided on temporary differences arising on

investments in subsidiaries, associates and joint ventures, except
where the timing of the reversal of the temporary difference can be
controlled and it is probable that the temporary difference will not
reverse in the foreseeable future.
3 New accounting policies and future requirements

The following IFRS and IFRIC interpretation have been issued by the
IASB and are likely to affect future Annual Reports.
Deferred tax is provided using rates of tax that have been enacted or
substantively enacted by the balance sheet date. Deferred tax liabilities
and assets are not discounted.
IFRS 7 Financial instruments: disclosures was issued in August 2005

and is required to be implemented by GSK from 1st January 2007. This
new standard incorporates the disclosure requirements of IAS 32,
which it supersedes, and adds further quantitative and qualitative
disclosures in relation to financial instruments.
Derivative financial instruments and hedging (2005)

Derivative financial instruments are used to manage exposure to
market risks from treasury operations. The principal derivative
instruments used by GlaxoSmithKline are foreign currency swaps,
interest rate swaps and forward foreign exchange contracts. The
Group does not hold or issue derivative financial instruments for
trading or speculative purposes.
IFRIC 4 Determining whether an arrangement contains a lease was

issued in December 2004 and is required to be implemented by GSK
from 1st January 2006. The interpretation requires arrangements
which may have the nature, but not the legal form, of a lease to be
accounted for in accordance with IAS 17 Leases. This interpretation
is not expected to have a material impact on the Group.
Derivative financial instruments are initially recognised in the balance

sheet at cost and then remeasured at subsequent reporting dates to
fair value. Hedging derivatives are classified on inception as fair value
hedges, cash flow hedges or net investment hedges. Changes in the
fair value of derivatives designated as fair value hedges are recorded
in the income statement, with the changes in the fair value of the
hedged asset or liability.
4 Exchange rates
The Group uses the average of exchange rates prevailing during the
period to translate the results and cash flows of overseas subsidiaries,
joint ventures and associated undertakings into sterling and period
end rates to translate the net assets of those undertakings.
The currencies which most influence these translations, and the
relevant exchange rates, were:
Changes in the fair value of derivatives designated as cash flow hedges

are recognised in equity. Amounts deferred in equity are transferred
to the income statement in line with the hedged forecast transaction.
Hedges of net investments in foreign entities are accounted for in a
similar way to cash flow hedges.
Average rates:
/US$
/Euro
/Yen
Period end rates:
/US$
/Euro
/Yen
Changes in the fair value of any derivative instruments that do not

qualify for hedge accounting are recognised immediately in the
income statement.
92
2005
2004
2003
1.82
1.46
200.00
1.83
1.47
197.00
1.64
1.45
191.00
1.72
1.46
203.00
1.92
1.41
197.00
1.79
1.42
192.00

continued
5 Segment information
The Groups primary segment reporting is by business sector with geographical reporting being the secondary format. The business sectors consist
of Pharmaceuticals (prescription pharmaceuticals and vaccines) and Consumer Healthcare (oral care, OTC medicines and nutritional healthcare).
The geographical sectors of the USA, Europe and International (other Rest of World markets) reflect the Groups most significant regional markets
and are consistent with the Groups regional market management reporting structure. Business sector data includes an allocation of corporate costs
to each sector on an appropriate basis. There are no sales between business sectors.The Groups activities are organised on a global basis. The
geographical sector figures are therefore influenced by the location of the Groups operating resources, in particular manufacturing and research,
and by variations over time in intra-Group trading and funding arrangements. Turnover is shown by business sector and by location of customer.
Other geographic information is given by location of subsidiary. The UK segment information gives turnover by location of customer and location
of subsidiary. The UK operating profit, total assets and net assets are also shown. Where the Group co-promotes a product and the third party
records the sale, the Group records its share of revenue as co-promotion income within turnover. The nature of co-promotion activities is such that
the Group records no costs of sales. Pharmaceutical turnover includes co-promotion revenue of 112 million (2004 65 million, 2003 35 million).
2005
m
2004
m
2003
m
Pharmaceuticals
Consumer Healthcare
18,661
2,999
17,100
2,886
18,114
2,956
Turnover
21,660
19,986
21,070
Pharmaceuticals
Consumer Healthcare
6,159
715
5,126
630
5,519
531
Operating profit
6,874
Turnover by business sector
Finance income
Finance costs
Share of profits after tax of associates and joint ventures:
Pharmaceuticals
Consumer Healthcare
Profit on disposal of interest in associates
5,756
6,050
257
(451)
176
(362)
101
(254)
52
60
57
149
6,732
5,779
5,954
(1,916)
(1,757)
(1,651)
5
4,816
4,022
4,308
Pharmaceuticals
Consumer Healthcare
276
209
Investment in associates and joint ventures
276
209
Additions
Pharmaceuticals
Consumer Healthcare
2,031
164
1,301
150
Total additions
2,195
1,451
Taxation
Profit on disposals of businesses
Investments in associates and joint ventures by business sector
Property, plant and equipment and intangible assets by business sector
Depreciation/amortisation
Pharmaceuticals
Consumer Healthcare
(807)
(97)
(766)
(93)
Total depreciation/amortisation
(904)
(859)
Impairment
Pharmaceuticals
Consumer Healthcare
(92)
(39)
(5)
Total impairment
(92)
(44)
Impairment reversal
Pharmaceuticals
Consumer Healthcare
11
Total impairment reversal
11
93
Profit by business sector

continued
5 Segment information continued

2005
m
2004
m
Pharmaceuticals
Consumer Healthcare
16,431
2,446
14,239
2,323
Total operating assets
18,877
16,562
276
1,025
179
4,209
2,630
2
209
1,512
5
2,467
2,187
2
27,198
22,944
(9,099)
(1,070)
(7,687)
(963)
(10,169)
(8,650)
(1,200)
(5,271)
(150)
(2,838)
(1,582)
(4,381)
(72)
(2,322)
(19,628)
(17,007)
Total assets by business sector
Investments in associates
Liquid investments
Derivative financial instruments
Current and deferred taxation
Tangible assets held for sale
Total assets
Total liabilities by business sector

Pharmaceuticals
Consumer healthcare
Total operating liabilities
Total liabilities
2005
m
2004
m
2003
m
9,867
6,892
4,901
9,191
6,395
4,400
10,276
6,346
4,448
21,660
19,986
21,070
Property, plant and equipment and intangible asset additions by location
2005
m
2004
m
USA
Europe
International
509
742
944
323
976
152
2,195
1,451
USA
Europe
International
Inter-segment trading balances
4,459
16,423
5,020
(7,025)
3,588
16,536
2,921
(6,483)
Total operating assets
18,877
16,562
276
1,025
179
4,209
2,630
2
209
1,512
5
2,467
2,187
2
27,198
22,944
Turnover by location of customer

USA
Europe
International
Turnover
Total additions
Total assets by location
Investments in associates
Liquid investments
Tangible assets held for sale
Total assets
94

continued
5 Segment information continued

UK Segment
For the purposes of US GAAP information is given separately in respect of the UK, which, although included in the Groups Europe market
region, is considered the Groups home segment for the purposes of segmental reporting.
2005
m
2004
m
2003
m
Turnover by location of customer
1,431
1,382
1,338
Turnover including inter-segment turnover

Inter-segment turnover
4,414
2,657
4,386
2,709
4,610
2,883
Turnover by location of subsidiary
1,757
1,677
1,727
Operating profit
1,576
1,327
1,438
Total assets
7,057
6,521
Net operating assets
2,290
2,253
2005
m
2004
m
2003
m
83
290
(9)
96
146
(7)
75
242
(7)
364
235
310
6 Other operating income
Royalties
Asset disposal profits
Other income including fair value adjustments
Royalties are principally a core of recurring income from the out-licensing of intellectual property. Asset disposal profits include product
divestments and disposals of equity investments, intellectual property and tangible property. Other income includes equity investment carrying
value adjustments arising from stock market changes and fair value adjustments arising on the Quest Collar and Theravance put and call options.
2005
m
The following items have been charged in operating profit:

Employee costs (Note 8)
Advertising
Distribution costs
Depreciation of property, plant and equipment
Amortisation of intangible assets
Net foreign exchange (gains)/losses
Inventories:
Cost of inventories included in cost of sales
Write-down of inventories
Reversal of prior year write-down of inventories
Operating lease rentals:
Minimum lease payments
Contingent rents
Sub-lease payments
Audit fees
Fees to auditors for other work:
Auditors UK firm
Auditors overseas firms
95
2004
m
2003
m
5,254
697
270
710
194
(3)
5,054
599
266
691
168
72
5,461
615
279
704
127
41
4,335
119
(61)
4,032
142
(49)
4,337
105
(20)
104
12
1
8.5
110
9
7.2
144
8
6.9
1.8
4.2
2.6
4.7
1.7
5.9
7 Operating profit

continued
7 Operating profit continued
Analysis of fees to auditors for other work:

Advisory services related to section 404 of Sarbanes-Oxley Act 2002
Other non-statutory assurance services
Tax compliance services
Tax planning and advice
Other services
2005
m
2004
m
2003
m
2.4
1.0
0.7
1.6
0.3
2.0
1.4
1.0
2.0
0.9
1.3
1.3
0.8
3.8
0.4
Included within audit fees above is a fee of 10,700 (2004 10,000, 2003 10,000) relating to the company audit of GlaxoSmithKline plc.
Included within other non-statutory assurance services are amounts related to the Groups preparation for the adoption of International Financial
Reporting Standards. Other services include human resources advisory, compliance and treasury related services.
At 31st December 2005, the amount due to PricewaterhouseCoopers for fees yet to be invoiced was 3.0 million, comprising statutory audit
2.1 million, further assurance 0.7 million and taxation services of 0.2 million.
8 Employee costs
Wages and salaries

Social security costs
Pension and other post-employment costs (see Note 26)
Cost of share-based incentive plans
Severance and other costs from integration and restructuring activities
2005
m
2004
m
2003
m
4,152
432
350
236
84
3,864
430
347
333
80
3,999
444
421
375
222
5,254
5,054
5,461
The Group provides benefits to employees, commensurate with local practice in individual countries, including, in some markets, healthcare
insurance, subsidised car schemes and personal life assurance.
The average number of persons employed by the Group (including Directors) during the year
Manufacturing
2005
Number
2004
Number
2003
Number
30,906
53,634
14,963
31,427
53,513
14,897
34,265
54,128
14,773
99,503
99,837
103,166
The average number of Group employees excludes temporary and contract staff. The numbers of Group employees at the end of each financial
year are given in the Financial record on page 180.The average number of persons employed by GlaxoSmithKline plc in 2005 was nil
(2004 nil).
The compensation of the Directors, the CET and the Company Secretary, in aggregate, was as follows:
Wages and salaries

Social security costs
Pension and other post-employment costs
Cost of share-based incentive plans
Information on Directors remuneration is given in the Remuneration Report on pages 37 to 54.
96
2005
m
2004
m
2003
m
17
1
3
15
13
1
2
16
16
1
1
19
36
32
37

continued
9 Finance income
2005
m
2004
m
2003
m
Interest income
Interest on extended credit on receivables
Net investment hedges
Fair value adjustments on non-hedging derivatives
268
8
(17)
(2)
173
3
98
3
257
176
101
2005
m
2004
m
2003
m
(11)
(412)
(4)
(25)
2
(1)
(6)
(337)
(2)
(1)
(16)
(6)
(226)
(2)
(20)
(451)
(362)
(254)
2005
m
2004
m
2003
m
10 Finance costs
Interest on bank loans and overdrafts
Interest on other loans
Interest in respect of finance leases
Realised losses on financial instruments
Unwinding of discount on provisions
Fair value hedges
Fair value adjustments on non-hedging derivatives
Associates:
Share of after tax profits of Quest Diagnostics Inc.
Share of after tax losses of other associates
52
(1)
59
(1)
58
(2)
Share of after tax profits/(losses) of joint ventures
51
1
58
2
56
1
52
60
57
32
48
31
50
31
51
2005
m
2004
m
2003
m
3,029
296
2,806
275
2,893
268
2005
m
2004
m
2003
m
589
(235)
429
(156)
673
(290)
Share of turnover of joint ventures

Sales to joint ventures and associates
Summarised income statement information in respect of the Groups associates is set out below:
Total turnover
Total profit/(loss)
12 Taxation
Taxation charge based on profits for the year
UK corporation tax at the UK statutory rate
Less double taxation relief
Overseas taxation
354
1,665
273
1,394
383
1,578
Current taxation
Deferred taxation
2,019
(103)
1,667
90
1,961
(310)
1,916
1,757
1,651
97
11 Associates and joint ventures

continued
12 Taxation continued
2005
%
2004
%
2003
%
UK statutory rate of taxation

Overseas taxes
Benefit of special tax status
R&D credits
Intercompany stock profit
Impact of share based payments
Tax on profit of associates
Other differences
Prior year items
30.0
3.0
(2.3)
(1.4)
1.0
(0.3)
(0.4)
(0.4)
(0.7)
30.0
2.5
(3.6)
(1.5)
0.3
1.5
(0.4)
0.5
1.1
30.0
1.9
(3.8)
(1.2)
(0.4)
1.3
(0.5)
(0.6)
1.0
Tax rate
28.5
30.4
27.7
Reconciliation of the taxation rate on Group profits
The Group operates in countries where the tax rate differs from the UK tax rate. Profits arising from certain operations in Singapore, Puerto
Rico, Ireland and Belgium are accorded special status and are taxed at reduced rates compared with the normal rates of tax in these territories.
The effect of this reduction in the taxation charge increased earnings per share by 2.7p in 2005, 3.6p in 2004 and 3.9p in 2003.
The Group is required under IFRS to create a deferred tax asset in respect of unrealised intercompany profit arising on stock held by the Group
at the year end by applying the tax rate of the country in which the stock is held (rather than the tax rate of the country where the profit was
originally made and tax paid, which is the practice under UK and US GAAP). The Group tax rate was increased by 1.0% in 2005 (2004 0.3%,
2003 0.4% decrease) as a result of reductions in work-in-progress and finished goods.
The integrated nature of the Groups worldwide operations, involving significant investment in research and strategic manufacture at a limited
number of locations, with consequential cross-border supply routes into numerous end-markets, gives rise to complexity and delay in negotiations
with revenue authorities as to the profits on which individual Group companies are liable to tax. Disagreements with, and between, revenue
authorities as to intra-Group transactions, in particular the price at which goods should be transferred between Group companies in different
tax jurisdictions, can produce conflicting claims from revenue authorities as to the profits to be taxed in individual territories. Resolution of such
issues is a continuing fact of life for GSK.
The Group has open issues with the revenue authorities in the USA, UK, Japan and Canada; by far the largest relates to Glaxo heritage products,
in respect of which the US Internal Revenue Service (IRS) and HM Revenue & Customs (HMRC) in the UK have made competing and contradictory
claims. GSK has attempted to settle the US dispute, first through direct discussion with the IRS and subsequently through discussions between
the US and UK authorities under the terms of the double tax convention between the two countries; these discussions were terminated in July
2003. On 6th January 2004 the IRS issued a Notice of Deficiency for the years 1989-1996 claiming additional taxes of $2.7 billion.
On 2nd April 2004 the Group filed a petition in the US Tax Court disputing the IRS claim and seeking a refund of $1 billion in taxes. On 25th
January 2005 the IRS issued a further Notice of Deficiency for the years 1997-2000 claiming additional federal taxes of $1.9 billion, which the
Group contested by filing a petition in the US Tax Court on 12th April 2005, to which the IRS filed its statutory Answer on 7th June 2005. In
September 2005 the Court agreed to consolidate the IRS claims for 1997-2000 with those for 1989-1996 into a single trial. The total claims
for these periods amount to $4.6 billion of additional federal taxes and related interest to 31st December 2005 of $3.7 billion, net of federal
tax relief, giving a total of $8.3 billion. The Groups petitions against the IRS claims include counter-claims for repayment of federal taxes
totalling $1.8 billion, based partly by reference to an Advance Pricing Agreement (APA) between SmithKline Beecham and the IRS covering
the transfer pricing of Tagamet between 1991 and 1993. On 23rd December 2004 the IRS filed a motion for summary judgement to exclude
any evidence relating to APAs from the court proceedings. On 31st March 2005 the trial judge denied the IRS motion and reserved ruling on
the admissibility of APA evidence until full trial, which is scheduled to commence on 16th October 2006. A decision is expected by mid-2008.
As similar tax issues remain open for 2001 to date, GSK expects to receive further substantial claims by the IRS for these years. GSK continues
to believe that the profits reported by its US subsidiaries for the period 1989 to date, on which it has paid taxes in the USA, are more than
sufficient to reflect the activities of its US operations. However, the Group tax creditor balance at 31st December 2005 of 2.3 billion (2004
1.8 billion) includes a provision for the estimated amount at which the IRS dispute might ultimately be settled. If the IRS were to follow the
same methodology as applied previously in respect of these later years, GSK estimates that the potential unprovided exposure in respect of
this dispute with the IRS for the years 1989-2005 amounted to approximately $11.5 billion at 31st December 2005 (2004 $10.1 billion).
GSK is in continuing discussions with HMRC in respect of UK transfer pricing and other matters which are in dispute for the years 1995 to
date. However little progress has been made over the past year and consequently these matters may become subject to litigation in due
course.
98

continued
12 Taxation continued
GSK uses the best advice in determining its transfer pricing methodology and in seeking to manage transfer pricing issues to a satisfactory
conclusion and, on the basis of external professional advice, continues to believe that it has made adequate provision for the liabilities likely to
arise from open assessments. However, there continues to be a wide difference of views between the Group, the IRS, HMRC and other relevant
taxation authorities where open issues exist. The ultimate liability for such matters may vary from the amounts provided and is dependent upon
the outcome of litigation proceedings and negotiations with the relevant tax authorities.
Except as shown in this Annual Report, no provision has been made for taxation which would arise on the distribution of profits retained by
overseas subsidiary and associated undertakings, on the grounds that no remittance of profit retained at 31st December 2005 is required in such
a way that incremental tax will arise. The aggregate amount of these unremitted profits at the balance sheet date was approximately 24 billion.
At 31st December 2005 the Group had recognised a deferred tax asset of 87 million (2004 20 million) in respect of income tax losses of
approximately 291 million (2004 63 million). Of these losses, 64 million (2004 28 million) are due to expire between 20072012,
184 million (2004 19 million) are due to expire between 20182025 and 43 million (2004 16 million) are available indefinitely. At 31st
December 2005 the Group had not recognised any deferred tax asset in respect of income tax losses of approximately 217 million (2004
387 million), of which 28 million (2004 358 million) are due to expire between 20072012, 79 million (2004 nil) are due to expire
between 20182025 and 110 million (2004 29 million) are available indefinitely. The Group had capital losses at 31st December 2005
estimated to be in excess of 10 billion in respect of which no deferred tax asset has been recognised. Deferred tax assets are not recognised
where there is insufficient evidence that losses will be utilised.
Payable
m
Movement on current tax account
Recoverable
m
Net
m
At 1st January 2005

Charge to profit and loss account
Cash paid
Other movements
(1,753)
(183)
(1,591)
1,195
63
155
2
(428)
512
175
(1,598)
(181)
(2,019)
1,707
238
At 31st December 2005
(2,269)
416
(1,853)
Deferred taxation
asset/(liability)
Pensions &
Accelerated
Product & other post
Legal
Manucapital
Intra-group business retirement
Tax & other
facturing
allowances Intangibles
profit disposals
benefits Losses disputes restructuring
Share
Stock
option
valuation and award
adjustments
schemes
Other
net
temporary
differences
Total
Deferred tax asset at

1st January 2005
Deferred tax liability at
1st January 2005
(54)
34
759
524
19
149
73
(62)
67
523
2,032
(558)
(328)
(32)
294
10
26
(52)
70
(569)
At 1st January 2005

IAS 39 adjustments
(612)
(294)
759
(32)
818
20
159
99
(114)
67
593 1,463
(5)
(5)
At 1st January 2005,

as adjusted
Credit/(charge) to income
Credit/(charge) to equity
Transfer to/from current tax
Acquisitions
Other movements
(612)
(9)
(10)
10
6
(294)
(6)
16
(258)
2
759
(50)
(32)
(3)
39
818
20
45
29 (24)
257
(88)
86
(1)
5
159
19
62
(79)
99
1
(20)
(7)
(114)
(6)
(5)
67
59
25
588 1,458
55
99
49
103
(18)
264
(13) (135)
4
(162)
12
18
(615)
(540)
709
1,060
87
161
73
(122)
151
677
1,645
(492)
(18)
709
(9)
1,035
63
160
73
(72)
151
614
2,214
Deferred tax asset at

31st December 2005
Deferred tax liability at
31st December 2005
(123)
(522)
13
25
24
(50)
63
(569)
(615)
(540)
709
1,060
87
161
73
(122)
151
677
1,645
Deferred taxation provided on stock valuation adjustments, intra-Group profit and other temporary differences shown above are current. All
deferred taxation movements arise from the origination and reversal of temporary differences. Other net temporary differences include accrued
expenses and other provisions.
99
Movement in deferred tax assets and liabilities

continued
13 Earnings per share

Basic earnings per share
2005
p
2004
p
2003
p
82.6
82.0
68.1
68.0
72.3
72.1
Earnings per share has been calculated by dividing the profit attributable to shareholders by the weighted average number of shares in issue
during the period. The number of shares used in calculating basic and diluted earnings per share are reconciled below.
Weighted average number of shares in issue
millions
millions
millions
Basic
Dilution for share options
5,674
46
5,736
12
5,806
18
Diluted
5,720
5,748
5,824
Shares held by the ESOP Trusts are excluded. The trustees have waived their rights to dividends on the shares held by the ESOP Trusts.
14 Dividends
2005
Total dividend (m)
Dividend per share (pence)
Paid/payable
First interim
Second interim
Third interim
Fourth interim
Total
568
10
567
10
568
10
792
14
2,495
44
7th July 2005
6th October 2005
5th January 2006
6th April 2006
575
10
573
10
571
10
684
12
1st July 2004
30th September 2004
6th January 2005
7th April 2005
524
9
522
9
520
9
808
14
3rd July 2003
2nd October 2003
6th January 2004
15th April 2004
2004
Total dividend (m)
Paid
2,403
42
2003
Total dividend (m)
Paid
2,374
41
Under IFRS interim dividends are only recognised in the financial statements when paid and not when declared. GSK normally pays a dividend
two quarters after the quarter to which it relates and one quarter after it is declared. The 2005 financial statements recognise those dividends
paid in 2005, namely the third and fourth interim dividends for 2004 and the first and second interim dividends for 2005. The amounts
recognised in each year are as follows:
100
2005
m
2004
m
2003
m
2,390
2,476
2,333

continued
Land and
buildings
m
Plant,
equipment
and vehicles
m
Assets in
construction
m
Total
m
Cost at 1st January 2004

Additions
Additions through business combinations
Disposals
Reclassifications
Transfer to assets held for sale
3,999
(78)
81
10
(58)
113
(5)
7,214
(93)
333
28
(267)
300
(3)
650
(11)
473
(6)
(424)
-
11,863
(182)
887
38
(331)
(11)
(8)
Cost at 31st December 2004

Additions
Disposals
Reclassifications
4,062
136
54
32
(82)
83
(4)
7,512
183
307
45
(404)
255
(11)
682
19
640
33
(4)
(348)
12,256
338
1,001
110
(490)
(10)
(15)
4,281
7,887
1,022
Depreciation at 1st January 2004

Provision for the year
Disposals
Reclassifications
(1,111)
25
(123)
29
8
1
(4,281)
63
(568)
208
(5)
5
(5,392)
88
(691)
237
3
6
Depreciation at 31st December 2004

Disposals
Reclassifications
(1,171)
(38)
(125)
43
(4,578)
(119)
(585)
356
1
10
(5,749)
(157)
(710)
399
1
11
Depreciation at 31st December 2005
(1,290)
(4,915)
(6,205)
Impairment at 1st January 2004

Disposals
Impairment losses
Reversal of impairments
(130)
4
6
(24)
8
(157)
1
17
(11)
3
(28)
(315)
5
24
(35)
11
Impairment at 31st December 2004

Disposals
Impairment losses
Reversal of impairments
(136)
(9)
10
(13)
(147)
(2)
2
(18)
3
(27)
(310)
(11)
14
(31)
3
2
(146)
(162)
(25)
(333)
Total depreciation and impairment at 31st December 2004
(1,307)
(4,725)
(27)
(6,059)
Total depreciation and impairment at 31st December 2005
(1,436)
(5,077)
(25)
(6,538)
Net book value at 1st January 2004
2,758
2,776
622
6,156
Net book value at 31st December 2004
2,755
2,787
655
6,197
2,845
2,810
997
6,652
101
13,190
15 Property, plant and equipment

continued
15 Property, plant and equipment continued

The net book value at 31st December 2005 of the Groups land and buildings comprises freehold properties 2,635 million (2004 2,556
million), properties with leases of 50 years or more 155 million (2004 143 million) and properties with leases of less than 50 years 55
million (2004 56 million).
Included in land and buildings at 31st December 2005 are leased assets with a cost of 165 million (2004 155 million), accumulated
amortisation of 49 million (2004 46 million) and a net book value of 116 million (2004 109 million).
Included in plant, equipment and vehicles at 31st December 2005 are leased assets with a cost of 153 million (2004 93 million), accumulated
amortisation of 57 million (2004 25 million) and a net book value of 96 million (at 1st January 2005 68 million).
The impairment losses principally arise from decisions to rationalise facilities and are calculated based on either fair value less costs to sell or
value in use. The value in use calculations determine the net present value of the projected risk-adjusted, post-tax cash flows of the relevant
asset or cash generating unit, applying a discount rate of the Group post-tax weighted average cost of capital of 8%, adjusted where appropriate
for country specific risks. This approximates to applying a pre-tax discount rate to pre-tax cash flows. These losses have been charged through
Cost of sales, 16 million, Research and development, 2 million, and Selling, general and administration, 13 million.
16 Goodwill
2005
m
2004
m
Cost at 1st January

Disposals
Assets written off
304
10
383
(1)
294
11
(1)
Cost at 31st December
696
304
Net book value at 1st January
304
294
Net book value at 31st December
696
304
The additions for the year comprise 357 million on the acquisition of ID Biomedical Corporation and 26 million on the acquisition of Corixa
Corporation. See Note 34 for further details.
Goodwill is not amortised but is tested for impairment at least annually. Value in use calculations are generally utilised to calculate recoverable
amount. Value in use is calculated as the net present value of the projected risk-adjusted, post-tax cash flows of the cash generating unit in
which the goodwill is contained, applying a discount rate of the Group post-tax weighted average cost of capital of 8%, adjusted where
appropriate for country specific risks. This approximates to applying a pre-tax discount rate to pre-tax cash flows.
102

continued
Licences,
patents, etc.
m
Brands
m
Total
m
Cost at 1st January 2004

Additions
Disposals
Assets written off
Reclassifications from property, plant and equipment
541
(6)
77
(9)
(5)
11
1,059
(39)
449
(1)
(19)
1,169
(25)
(1)
2,769
(70)
526
(11)
(24)
11

Additions
Disposals
Assets written off
609
13
62
1
(10)
10
1,449
72
207
816
(29)
(43)
1,143
41
3,201
126
269
816
(28)
(53)
10
685
2,472
1,184
4,341
Amortisation at 1st January 2004

Disposals
Assets written off
(234)
3
(93)
9
4
(3)
(202)
11
(75)
(436)
14
(168)
9
5
(3)
Amortisation at 31st December 2004

Disposals
Assets written off
(314)
(6)
(85)
7
(1)
(265)
(21)
(109)
5
5
(579)
(27)
(194)
5
12
(1)
Amortisation at 31st December 2005
(399)
(385)
(784)
Impairment at 1st January 2004

Impairment losses
Disposals
(22)
(1)
(58)
1
(8)
(23)
1
(103)
2
(9)
1

Impairment losses
Assets written off
(23)
(1)
1
(65)
(2)
(60)
(21)
(2)
(1)
(109)
(4)
(62)
1
(23)
(127)
(24)
(174)
Total amortisation and impairment at 31st December 2004
(337)
(330)
(21)
(688)
Total amortisation and impairment at 31st December 2005
(422)
(512)
(24)
(958)
Net book value at 1st January 2004
285
799
1,146
2,230
272
1,119
1,122
2,513
263
1,960
1,160
3,383
103
Computer
software
m
17 Other intangible assets
Notes to the nancial statements

continued
17 Other intangible assets continued

Amortisation and impairment has been charged through Research and development, and Selling, general and administration. At 31st December
2005, the net book value of computer software included 24 million that had been internally generated.
The additions through business combinations in the year of 816 million comprise 701 million from the acquisition of ID Biomedical Corporation
and 115 million from the acquisition of Corixa Corporation (see Note 34). Other additions to licences and patents in the year relate to the
purchase of development and commercialisation rights for Botox in certain territories acquired from Allergan and various other compounds
rights (see Note 35).
Brands comprise a portfolio of products acquired with the acquisitions of Sterling Winthrop Inc. in 1994, and The Block Drug Company in
2001. The net book values of the major brands are as follows:
Panadol
Sensodyne
Polident
Corega
Poligrip
Solpadeine
Others
2005
m
2004
m
340
230
97
87
60
56
290
322
226
96
85
59
57
277
1,160
1,122
Each of these brands is considered to have an indenite life, given the strength and durability of the brand and the level of marketing support.
The brands are in relatively stable and protable market sectors, and their size, diversication and market shares mean that the risk of marketrelated factors causing a shortening of the brands lives is considered to be relatively low. The Group is not aware of any material legal,
regulatory, contractual, competitive, economic or other factor which could limit their useful lives. Accordingly, they are not amortised. Each
brand is tested annually for impairment applying a fair value less costs to sell methodology and using ve year post-tax cash ow forecasts
with a terminal value calculation and applying a discount rate of the Group post-tax weighted average cost of capital of 8%, adjusted where
appropriate for country-specic risks. This approximates to applying a pre-tax discount rate to pre-tax cash ows.
The main assumptions include future sales prices and volumes, product contribution and the future development expenditure required to
maintain the products marketability and registration in the relevant jurisdiction and the products life. These assumptions are reviewed as part
of managements budgeting and strategic planning cycle for changes in market conditions and product erosion, through generic competition.
18 Investments in associates and joint ventures
Joint
ventures
m
Associated
undertakings
m
2005
Total
m
2004
Total
m
At 1st January
Implementation of accounting for nancial instruments under IAS 39
14
195
(7)
209
(7)
210
At 1st January, as adjusted

Additions
Transfers
Disposals
Retained prot for the year
14
1
(1)
188
25
2
47
202
26
2
46
210
(14)
2
(1)
(36)
48
At 31st December
14
262
276
209
The principal associated undertaking is Quest Diagnostics Inc., a US clinical laboratory business listed on the New York Stock Exchange. The
investment had a book value at 31st December 2005 of 244 million (2004 173 million) and a market value of 1,093 million (2004
908 million).
At 31st December 2005, the Group owned 18.4% of Quest (2004 18.6%). Although the Group holds less than 20% of the ownership
interest and voting control in Quest, the Group has the ability to exercise signicant inuence through its active participation on the Quest
Board of Directors and Board sub-committees.
104

continued
18 Investments in associates and joint ventures continued

Summarised balance sheet information in respect of the Groups associates is set out below:
Total assets
Total liabilities
Net assets
Groups share of associates net assets
2005
m
2004
m
3,134
(1,481)
2,233
(999)
1,653
1,234
262
195
2005
2004
19 Other investments
Total
m
Total
m
At 1st January
298
61
262
At 1st January as adjusted

Additions
Fair value movements
Impairments
Transfers
Disposals
359
33
23
14
(35)
(12)
(20)
262
(11)
103
(25)
1
(32)
At 31st December
362
298
Other investments comprise non-current equity investments which are available-for-sale investments that are recorded at fair value at each
balance sheet date. For investments traded in an active market, the fair value is determined by reference to the relevant stock exchange quoted
bid price. For other investments, the fair value is estimated by reference to the current market value of similar instruments or by reference to
the discounted cash ows of the underlying net assets.
The Group holds a number of equity investments, frequently in entities where the Group has entered into research collaborations. Equity
investments are recorded as non-current assets unless they are expected to be sold within one year, in which case they are recorded as current
assets. Non-current equity investments include listed investments of 268 million (2004 270 million) that offer the Group the opportunity
for return through dividend income and fair value gains.
On disposal investments fair value movements are reclassied from reserves to the income statement based on average cost.
The impairment losses recorded in the tables above have been recognised in the income statement for the year within other operating income,
together with amounts recycled from the fair value reserve (Note 32) on recognition of the impairments. These impairments initially result from
prolonged or signicant declines in the fair value of the equity investments below acquisition cost, subsequent to which any further declines
in fair value are immediately taken to the income statement.
20 Other non-current assets

Other non-current assets comprise of sundry receivables which are due in more than one year, including insurance recovery receivables which
have been discounted using risk-free rates of return and derivative nancial instruments.
21 Inventories
Raw materials and consumables
Work in progress
Finished goods
105
2005
m
2004
m
721
552
904
629
644
920
2,177
2,193
Investments in joint ventures comprise 17 million share of gross assets (2004 16 million) and 3 million share of gross liabilities (2004 2
million). These principally arise from 50% interests in two joint ventures, Shionogi-GlaxoSmithKline Holdings, L.P., which is developing specied
chemical compounds, and GlaxoSmithKline Shire BioChem, which primarily co-markets Combivir, Trizivir and Epivir in certain territories.

continued
22 Trade and other receivables

Trade receivables
Prepaid pension contributions
Other prepayments and accrued income
Interest receivable
Employee loans and advances
Derivative nancial instruments
Other receivables
2005
m
2004
m
4,411
1
285
42
59
180
370
3,786
9
226
56
49
5
320
5,348
4,451
Trade receivables include 2 million (2004 7 million) due from associates and joint ventures, and are shown after deducting provisions for
bad and doubtful debts of 140 million (2004 128 million).
23 Cash and cash equivalents
Cash at bank and in hand

Short-term deposits
Commercial paper
2005
m
2004
m
686
1,677
1,846
408
884
1,175
4,209
2,467
2005
m
2004
m
1
1
2005
m
2004
m
819
804
102
240
34
1,187
1,784
171
6
707
639
114
269
27
982
1,451
72
6
5,147
4,267
Cash and cash equivalents include highly liquid investments with maturities of three months or less.
24 Assets held for sale
Land and buildings

Plant, equipment and vehicles
25 Trade and other payables

Trade payables
Wages and salaries
Social security
Other payables
Deferred income
Customer return and rebate accruals
Other accruals
Dividends payable
Customer return and rebate accruals are provided for by the Group at the point of sale in respect of the estimated rebates, discounts or
allowances payable to customers, principally in the USA. Provisions are made at the time of sale but the actual amounts paid are based on
claims made some time after the initial recognition of the sale. Because the amounts are estimated they may not fully reect the nal outcome
and the amounts are subject to change dependent upon, amongst other things, the types of buying group and product sales mix. The level
of provision is reviewed and adjusted quarterly in the light of historical experience of actual rebates, discounts or allowances given and returns
made and any changes in arrangements. Future events could cause the assumptions on which the provisions are based to change, which could
affect the future results of the Group.
106

continued
26 Pensions and other post-employment benefits

Pension and other post-employment costs
2005
m
2004
m
2003
m
UK pension schemes
US pension schemes
Other overseas pensions schemes
Unfunded post-retirement healthcare schemes
Other post-employment costs
124
41
83
100
2
119
44
74
92
18
163
83
61
90
24
350
347
421
198
25
25
100
2
192
22
23
92
18
263
19
25
90
24
350
347
421
Analysed as:
Funded dened benet/hybrid schemes
Unfunded dened benet schemes
Dened contribution schemes
Other post-employment costs
The costs of the dened benet pension and post-retirement healthcare schemes are charged in the income statement as follows:
Cost of sales
71
75
177
68
72
166
84
101
187
323
306
372
Contributions to dened benet schemes are determined in accordance with the advice of independent, professionally qualied actuaries.
Pension costs of dened benet schemes for accounting purposes have been assessed in accordance with independent actuarial advice, using
the projected unit method. In certain countries pension benets are provided on an unfunded basis, some administered by trustee companies.
Liabilities are generally assessed annually in accordance with the advice of independent actuaries. Formal, independent, actuarial valuations of
the Groups main plans are undertaken regularly, normally at least every three years.
The assets of funded schemes are generally held in separately administered trusts or are insured. Assets are invested in different classes in order
to maintain a balance between risk and return. Investments are diversied to limit the nancial effect of the failure of any individual investment.
During 2005, the target asset allocations for the UK schemes were 65% equities and 35% bonds and for the US scheme were 77% equities,
20% bonds and 3% property. The longer term aim is to increase the property element to 10% with a consequent reduction in equities.
Actuarial movements in the year are recognised in full through the statement of recognised income and expense.
The UK discount rate is based on the iBoxx over 15 year AA index and the US discount rate is based on Moodys Aa index. The expected return
on bonds reects the portfolio mix of index-linked, government and corporate bonds. An equity risk premium of between 3% and 4% is added
to this for equities. Projected ination rate and pension increases are long term predictions based on the yield gap between long term indexlinked and xed interest Gilts. In the UK, mortality rates are calculated using the PA92 standard mortality tables projected to 2006. Plan
obligations are then increased by between 3% and 10%, depending on each individual schemes mortality experience, to make allowance for
future improvements in life expectancy. In the USA, mortality rates are calculated using the RP2000 fully generational table, projected using
scale AA, with the white collar adjustment. This builds in a full allowance for future improvements in life expectancy.
During 2005, the Group made special funding contributions to the UK and US pension schemes totalling 366 million. GSK has agreed with
the trustees of the UK and US dened benet pension schemes that the Group would make additional contributions of approximately 370
million per year over a ve-year period ending 31st December 2009 in order to eliminate the decits on an IAS 19 basis, by that point.
In the UK the dened benet pension schemes operated for the benet of former Glaxo Wellcome employees and former SmithKline Beecham
employees remain separate. These schemes were closed to new entrants in 2001 and subsequent UK employees are entitled to join a dened
contribution scheme. In the USA the former Glaxo Wellcome and SmithKline Beecham dened benet schemes were merged during 2001.
In addition, the Group operates a number of post-retirement healthcare schemes, the principal one of which is in the USA.
The following information relates to the Groups dened benet pension and post-retirement healthcare schemes.
107
GSK entities operate pension arrangements which cover the Groups material obligations to provide pensions to retired employees.
These arrangements have been developed in accordance with local practices in the countries concerned. Pension benets can be provided by
state schemes; by dened contribution schemes, whereby retirement benets are determined by the value of funds arising from contributions
paid in respect of each employee, or by dened benet schemes, whereby retirement benets are based on employee pensionable remuneration
and length of service. Some hybrid dened benet schemes also include dened contribution sections.

continued
26 Pensions and other post-employment benefits continued

The Group has applied the following assumptions in assessing the liabilities:
UK
Rate of increase of future earnings

Discount rate
Expected pension increases
Cash balance credit/conversion rate
Ination rate
USA
Rest of World
2005
% pa
2004
% pa
2003
% pa
2005
% pa
2004
% pa
2003
% pa
2005
% pa
2004
% pa
2003
% pa
4.00
4.75
2.75
n/a
2.75
4.00
5.25
2.50
n/a
2.50
4.00
5.25
2.50
n/a
2.50
5.00
5.50
n/a
4.50
2.50
5.00
5.75
n/a
4.75
2.50
5.50
6.25
n/a
5.25
2.50
3.25
3.75
2.00
1.75
1.75
3.25
4.25
2.00
1.75
1.75
3.00
4.75
2.00
1.50
1.50
The amounts recorded in the income statement and statement of recognised income and expense for the three years ended 31st December
2005 in relation to the dened benet pension and post-retirement healthcare schemes were as follows:
2005
UK
m
Amounts charged to operating profit

Current service cost
Past service cost
Expected return on pension scheme assets
Interest on scheme liabilities
Settlements and curtailments
Actuarial losses recorded in the statement of

recognised income and expense
2004
Actuarial gains/(losses) recorded in the statement of

2003
Actuarial (losses)/gains recorded in the statement of

Group
m
Group
m
63
(126)
104
52
(28)
34
232
(439)
414
16
46
1
53
124
41
58
223
100
(490)
(109)
(93)
(692)
(102)
USA
m
Rest of World
m
Pensions
Post-retirement
benets
Group
m
Group
m
117
(272)
269
5
58
(118)
104
42
2
(20)
27
217
2
(410)
400
5
37
55
119
44
51
214
92
162
26
(26)
162
(54)
UK
m

Past service cost
Rest of World
m
Post-retirement
benefits
117
(285)
276
16
UK
m

Past service cost
USA
m
Pensions
USA
m
Rest of World
m
Pensions
Post-retirement
benets
Group
m
Group
m
109
3
(231)
246
36
67
(7)
(111)
119
15
44
(16)
(17)
25
220
(20)
(359)
390
51
29
(3)
64
163
83
36
282
90
(452)
174
(7)
(285)
(147)
The total actuarial losses recorded in the statement of recognised income and expense since 1st January 2003 amount to 1,118 million.
108

continued

The fair values of the assets and liabilities of the UK and US defined benefit schemes, together with aggregated data for other defined benefit
schemes in the Group are as follows:
Expected rate
of return
%
Fair
value
m
Expected rate
of return
%
Fair
value
m
7.75
4.25
4.00
3,895
1,764
85
8.50
7.50
5.50
4.00
1,440
106
352
78
7.00
6.25
3.50
3.25
Fair value of assets

Present value of scheme obligations
Included in other non-current assets

Included in pensions and other post-employment benefits
Actual return on plan assets
(174)
(265)
(1,749)
12
(1,310)
(174)
(277)
(1,761)
(174)
(265)
(1,749)
940
130
48
UK
USA
Rest of World
3,053
1,428
80
8.50
6.50
5.75
2.50
1,223
58
307
50
7.50
6.25
3.75
2.25
208
7
270
62
4,484
65
2,005
192
(1,174)
(112)
(214)
(1,500)
14
14
(1,174)
(112)
(228)
(1,514)
(1,174)
(112)
(214)
(1,500)
430
199
28
657
UK
USA
Rest of World
Fair
value
m
8.25
4.50
4.00
3,147
594
214
8.50
6.50
5.75
1.00
1,191
52
314
26
7.75
6.50
4.00
2.00
Group
Fair
value
m
Fair
value
m
194
6
226
18
4,532
58
1,134
258
3,955
(5,508)
1,583
(1,751)
444
(707)
5,982
(7,966)
(1,553)
(168)
(263)
(1,984)
(1,553)
(168)
(272)
(1,993)
(1,553)
(168)
(263)
(1,984)
610
341
30
981
109
Fair
value
m
6,746
(8,246)
Expected rate
of return
%
Fair
value
m
547
(761)
Fair
value
m
Group
1,638
(1,750)
Expected rate
of return
%
1,118
4,561
(5,735)
Average
expected rate
of return
%

12
(1,310)
8.25
4.50
4.00
Equities
Property
Bonds
Other assets
5,527
117
2,418
315
(1,310)
Fair
value
m
192
11
302
152
8,377
(10,126)
Expected rate
of return
%
Fair
value
m
657
(922)
Fair
value
m
Fair
value
m
1,976
(2,150)
Expected rate
of return
%

Group
5,744
(7,054)
Average
expected rate
of return
%
Equities
Property
Bonds
Other assets
Rest of World
Average
expected rate
of return
%
Equities
Property
Bonds
Other assets
USA
UK

continued

Movements in defined benefit obligations
UK
m
Rest of World
m
Post-retirement
benets
Group
m
Group
m
Obligations at 1st January 2003

Service cost
Interest cost
Actuarial losses
Scheme participants contributions
Benets paid
(4,503)
(112)
(246)
(788)
(13)
190
(36)
(1,789)
190
(60)
(119)
(57)
99
(15)
(602)
(47)
(28)
(25)
(40)
(3)
38
(6,894)
143
(200)
(390)
(885)
(16)
327
(51)
(834)
79
(26)
(64)
(147)
(8)
49
Obligations at 31st December 2003
(5,508)
(1,751)
(707)
(7,966)
(951)
(117)
(269)
(34)
(12)
210
(5)
126
(58)
(104)
(60)
97
31
(44)
(27)
(49)
(3)
38
157
(219)
(400)
(143)
(15)
345
(5)
52
(37)
(55)
(54)
(8)
48
(5,735)
(1,750)
(761)
(8,246)
(1,005)
Service cost
Interest cost
Actuarial losses
Benets paid
(117)
(276)
(1,137)
(12)
239
(16)
(217)
(63)
(104)
(112)
96
14
(52)
(34)
(128)
(3)
42
(203)
(232)
(414)
(1,377)
(15)
377
(16)
(138)
(47)
(53)
(102)
(9)
46
(7,054)
(2,150)
(922) (10,126)
(1,308)
Service cost
Interest cost
Actuarial losses
Benets paid
USA
m
Pensions
The liability for the US post-retirement healthcare scheme has been assessed using the same assumptions as for the US pension scheme,
together with the assumption for future medical ination of 10%, reducing by 0.75% per year to 5% in 2013 and thereafter. On this basis
the liability for the US scheme has been assessed at 1,133 million (2004 895 million; 2003 851 million).
The dened benet pension obligation is analysed as follows:
2005
m
Funded
Unfunded
Post-retirement benets are unfunded.
110
2004
m
2003
m
(9,858)
(268)
(8,029)
(217)
(7,758)
(208)
(10,126)
(8,246)
(7,966)

continued
Movements in fair value of assets
UK
m
USA
m
Rest of World
m
Pensions
Post-retirement
benets
Group
m
Group
m
Assets at 1st January 2003

Expected return on assets
Actuarial gains
Employer contributions
Benets paid
3,224
231
336
341
13
(190)
1,351
(170)
111
231
159
(99)
348
(17)
17
33
98
3
(38)
4,923
(187)
359
600
598
16
(327)
41
8
(49)
Assets at 31st December 2003
3,955
1,583
444
5,982
272
196
336
12
(210)
(117)
118
86
65
(97)
27
20
23
68
3
(38)
(90)
410
305
469
15
(345)
40
8
(48)
4,561
1,638
547
6,746
285
647
478
12
(239)
200
126
3
105
(96)
(4)
28
35
90
3
(42)
196
439
685
673
15
(377)
37
9
(46)
5,744
1,976
657
8,377
Actuarial gains
Benets paid
Actuarial gains
Benets paid
The UK dened benet schemes include dened contribution sections with account balances totalling 515 million at 31st December 2005
(2004 404 million, 2003 327 million). Information on scheme assets under US GAAP is given in Note 38.
Employer contributions for 2006 are estimated to be approximately 700 million in respect of deferred benet pension schemes and 50 million
in respect of post-retirement benets.
The transition date for conversion to IFRS for GSK was 1st January 2003 and therefore the following historical data has been presented from
that date. This will be built up to a rolling ve year record over the next two years.
History of actuarial gains and losses
Pensions
Post-retirement
benefits
Group
m
UK
m
USA
m
Rest of World
m
Group
m
647
11%
35
5%
685
8%
Actuarial losses of scheme liabilities (m)

Percentage of scheme obligations at 31st December 2005
(1,137)
16%
(112)
5%
(128)
14%

5,744
(7,054)
1,976
(2,150)
Decits in the schemes
(1,310)
(174)
2005
Actuarial gains of scheme assets (m)
Percentage of scheme assets at 31st December 2005
111
(1,377)
14%
(102)
8%
657
8,377
(922) (10,126)
(1,308)
(265)
(1,308)
(1,749)

continued

History of actuarial gains and losses
Pensions
Post-retirement
benets
Group
m
UK
m
USA
m
Rest of World
m
Group
m
2004
Actuarial gains of scheme assets (m)
196
4%
86
5%
23
4%
305
5%
Actuarial (losses)/gains of scheme liabilities (m)

Percentage of of scheme obligations at 31st December 2004
(34)
1%
(60)
3%
(49)
6%
(143)
2%
(54)
5%

4,561
(5,735)
1,638
(1,750)
547
(761)
6,746
(8,246)
(1,005)
(1,174)
(112)
(214)
(1,500)
(1,005)
336
8%
231
15%
33
7%
600
10%
(788)
14%
(57)
3%
(40)
6%
(885)
11%
(147)
15%

3,955
(5,508)
1,583
(1,751)
444
(707)
5,982
(7,966)
(951)
(1,553)
(168)
(263)
(1,984)
(951)
2003
Actuarial gains/(losses) of scheme assets (m)
Actuarial (losses)/gains of scheme liabilities (m)
Percentage of scheme obligations at 31st December 2003
Sensitivity analysis
Changes in the assumptions used may have a material impact on the annual dened benet pension and post-retirement costs or the benet
obligations.
m
A 0.25% decrease in discount rate would have the following approximate effect:
Increase in annual pension cost
Increase in annual post-retirement benets cost
Increase in pension obligation
Increase in post-retirement benets obligation
6
1
400
40
A one year increase in life expectancy would have the following approximate effect:
Increase in pension obligation
19
4
270
50
A 0.25% decrease in expected rates of returns on assets would have the following approximate effect:
20
A 1% increase in the rate of future healthcare ination would have the following approximate effect:
10
90
112

continued
27 Other provisions
Manufacturing
restructuring
m
Merger
integration
m
Legal
and other
disputes
m
Other
provisions
m
Total
m
At 1st January 2005

Charge for the year
Unwinding of discount
Applied
Reversed unused
Reclassications and other movements
46
2
(10)
(12)
224
6
16
(42)
(8)
(4)
1,074
88
380
18
(297)
(76)
(22)
187
8
37
102
6
(100)
(16)
29
1,531
104
37
498
24
(449)
(112)
3
26
192
1,165
253
1,636
To be settled within one year

To be settled after one year
10
16
77
115
657
508
151
102
895
741
26
192
1,165
253
1,636
The Group has recognised costs in previous years in respect of plans for manufacturing and other restructuring initiated in 1998, 1999 and in
2001 following the merger of Glaxo Wellcome and SmithKline Beecham and the acquisition of Block Drug. These plans are largely completed.
Costs recognised as a provision, principally in respect of identied severances at sites where it has been announced that manufacturing activities
will cease and site closure and cleaning costs are expected to be incurred mainly within the next three years. Costs of asset write-downs have
been recognised as impairments of property, plant and equipment.
GlaxoSmithKline is involved in a number of legal and other disputes, including notication of possible claims. Provisions for legal and other
disputes include amounts relating to US anti-trust, product liability, contract terminations, self-insurance, environmental clean-up and property
rental. The companys Directors, having taken legal advice, have established provisions after taking into account insurance and other agreements
and having regard to the relevant facts and circumstances of each matter and in accordance with accounting requirements. These provisions
were discounted by 71 million in 2005 (2004 11 million) using risk-free rates of return. The effect of the change in the discount rate in
2005 is to increase the discount at 31st December by 20 million. A number of products have a history of claims made and settlements which
makes it possible to use an IBNR (incurred but not reported) actuarial technique to determine a reasonable estimate of the Groups exposure
for unasserted claims in relation to those products. Apart from the IBNR provision, no provisions have been made for unasserted claims. The
ultimate liability for such matters may vary from the amounts provided and is dependent upon the outcome of litigation proceedings,
investigations and possible settlement negotiations.
It is in the nature of the Groups business that a number of these matters, including those provided using the IBNR actuarial technique, may be
the subject of negotiation and litigation over several years. The largest individual amounts provided are expected to be settled within three years.
At 31st December 2005, it is expected that 115 million (2004 236 million) of the provision made for legal and other disputes will be
reimbursed. This amount is included within non-current assets.
For a discussion of legal issues, refer to Note 41 Legal proceedings.
28 Other non-current liabilities
Accruals and deferred income

Other
payables
.
113
2005
m
2004
m
58
26
383
66
339
467
405
The Group has recognised costs in previous years in respect of plans for the integration of the Glaxo Wellcome and SmithKline Beecham
businesses. Implementation of the integration following the merger is substantially complete. Costs recognised as a provision in respect of
identied severances are expected to be incurred in 2006 and in respect of the programme to encourage staff to convert Glaxo Wellcome or
SmithKline Beecham share options into GlaxoSmithKline share options when employees exercise these options up to 2010. The discount on
this latter provision increased by 4 million in 2005 (2004 4 million), and was calculated using risk-free rates of return.

continued
29 Contingent liabilities
At 31st December 2005 contingent liabilities, comprising guarantees, discounted bills and other items arising in the normal course of business,
amounted to 342 million (2004 207 million). At 31st December 2005, 96 million (2004 134 million) nancial assets were pledged as
collateral for contingent liabilities. For a discussion of tax issues, refer to Note 12, Taxation and of legal issues, refer to Note 41, Legal
proceedings.
30 Net debt
Current assets:
Liquid investments
Short-term borrowings:
7.375% US$ US Medium Term Note 2005
8.75% Eurobond 2005
6.125% US$ Notes 2006
Commercial paper
Bank loans and overdrafts
Other loans
Obligations under nance leases
Long-term borrowings:
6.125% US$ Notes 2006
3.375% European Medium Term Note 2008
Loan stock
Bank loans
Other loans and private nancing
Obligations under nance leases
Net debt
2005
m
2004
m
1,025
4,209
1,512
2,467
5,234
3,979
(291)
(576)
(249)
(46)
(38)
(52)
(500)
(830)
(163)
(2)
(35)
(1,200)
(1,582)
(283)
(689)
(502)
(342)
(510)
(825)
(503)
(976)
(288)
(11)
(3)
(256)
(83)
(260)
(260)
(705)
(498)
(348)
(772)
(975)
(258)
(12)
(4)
(231)
(58)
(5,271)
(4,381)
(1,237)
(1,984)
Current assets
Liquid investments are classied as available-for-sale investments. At 31st December 2005, they included redeemable shares, which were fully
collateralised with highly rated bonds, of 1 billion (685 million). The 1 billion redeemable preference shares held at 31st December 2004
were redeemed during the year. The effective interest rate on liquid investments at 31st December 2005 was approximately 2.8%.
The effective interest rate on cash and cash equivalents at 31st December 2005 was approximately 4.0%.
114

continued
30 Net debt continued

Commercial paper comprises a US$10 billion programme, of which $991 million (576 million) was in issue at 31st December 2005 (2004
$1,593 million (830 million)), backed up by committed facilities of 364 days duration of $900 million (523 million) (2004 $900 million
(469 million)) renewable annually, and liquid investments, cash and cash equivalents as shown in the table above.
The weighted average interest rate on commercial paper borrowings at 31st December 2005 was 4.4% (2004 2.4%).
The weighted average interest rate on current bank loans and overdrafts at 31st December 2005 was 4.0% (2004 3.0%).
In 2005, two bonds were issued under the European Medium Term Note programme: a 750 million, 7 year, 3% coupon bond and a 750
million, 20 year, 4% coupon bond.
Loans due after one year are repayable over various periods as follows:
Between one and two years
Between two and three years
Between three and four years
Between four and ve years
After ve years
2005
m
2004
m
317
1,224
354
9
3,367
289
279
1,210
352
2,251
5,271
4,381
The loans repayable after ve years carry interest at effective rates between 3.0% and 5.4%. The repayment dates range from 2012 to 2034.
The average effective interest rate of all Notes at 31st December 2005 was approximately 4.5%.
2005
m
2004
m
41
33
23
13
9
15
36
28
17
5
3
7
Total future rental payments

Future nance charges
134
(13)
96
(3)
Total nance lease obligations
121
93
Finance lease obligations

Rental payments due within one year
Rental payments due between one and two years
Rental payments due between two and three years
Rental payments due between three and four years
Rental payments due between four and ve years
Rental payments due after ve years
115
Secured loans
Loans amounting to 20 million (2004 11 million) are secured by charges on non-current and current assets.

continued
31 Share capital and share premium account

Ordinary shares of 25p each
Number
m
Share capital authorised

Share
premium
m
10,000,000,000
10,000,000,000
10,000,000,000
2,500
2,500
2,500
Share capital issued and fully paid

At 1st January 2003
Issued under share options schemes
Purchased and cancelled
6,024,266,345
6,041,283
(80,844,000)
1,506
1
(20)
224
40

Issued under share option schemes
5,949,463,628
6,300,203
(18,075,000)
1,487
2
(5)
264
40

5,937,688,831
25,162,425
1,484
7
304
245
5,962,851,256
1,491
549
31st December
2005
Number (000) of shares issuable under outstanding options (Note 37)

Number (000) of unissued shares not under option
31st December
2004
31st December
2003
221,293
276,954
259,990
3,815,856
3,785,358
3,790,546
At 31st December 2005, of the issued share capital, 167,436,200 shares were held in the ESOP Trust, 142,779,678 shares were held as Treasury
shares and 5,652,635,378 shares were in free issue. All issued shares are fully paid.
A total of 6.5 billion has been spent by the company since 2001 on buying its own shares for cancellation or to be held as Treasury shares,
of which 1 billion was spent in 2005. The exact amount and timing of future purchases, and the extent to which repurchased shares will be
held as Treasury shares rather than being cancelled, will be determined by the company and is dependent on market conditions and other
factors. No shares were purchased in the period 1st January 2006 to 8th February 2006. In the period 9th February 2006 to 24th February
2006 a further 2.7 million shares have been purchased at a cost of 40 million. All purchases were through the publicly announced buy-back
programme.
The table below sets out the monthly purchases under the share buy-back programme:
Number of shares
000
Average share price excluding

commission and stamp duty
January 2005
February 2005
March 2005
April 2005
May 2005
June 2005
July 2005
August 2005
September 2005
October 2005
November 2005
December 2005
Nil
6,300
10,090
Nil
6,895
6,670
Nil
8,720
9,510
2,250
5,875
16,522
12.56
12.44
13.45
13.53
13.29
13.77
14.73
14.73
14.52
Total
72,832
13.65
Month
All shares purchased in 2005 are held as Treasury shares. For details of substantial shareholdings refer to Substantial shareholdings on page
183.
116

continued
32 Movements in equity
Shareholders equity
At 1st January 2003

Recognised income and expense for the year
Distributions to minority shareholders
Ordinary shares transferred by ESOP Trusts
Write-down of shares held by ESOP Trusts
Share
premium
m
Retained
earnings
m
Other
reserves
m
Total
m
Minority
interests
m
Total
equity
m
1,506
1
(20)
224
40
3,065
3,919
(2,333)
(980)
(87)
375
(926)
20
26
87
3,869
3,919
(2,333)
41
(980)
26
375
743
34
(96)
4,612
3,953
(96)
(2,333)
41
(980)
26
375

1,487
Changes in minority shareholdings

2
(5)
Ordinary shares purchased and held as Treasury shares
264
40
3,959
3,906
(2,476)
(201)
(799)
(180)
333
(793)
23
180
(21)
4,917
3,906
(2,476)
42
(201)
(799)
23
312
681
93
(489)
(72)
5,598
3,999
(489)
(72)
(2,476)
42
(201)
(799)
23
312

Implementation of accounting for nancial
instruments under IAS 39
1,484
304
4,542
(606)
5,724
213
5,937
(94)
78
(16)
(12)
At 1st January 2005, as adjusted

1,484
Changes in minority shareholdings

7
Tax on share-based incentive plans
304
245
4,448
4,426
(15)
(2,390)
(1,000)
(155)
240
25
(528)
(3)
68
155
5,708
4,423
(15)
(2,390)
252
(1,000)
68
240
25
217
153
(25)
(86)
5,925
4,576
(40)
(86)
(2,390)
252
(1,000)
68
240
25
549
5,579
(308)
7,311
259
7,570
1,491
Retained earnings and other reserves amounted to 5,271 million at 31st December 2005 (2004 3,936 million, 2003 3,166 million) of
which 8,067 million (2004 10,243 million, 2003 10,785 million) relates to the company and 180 million (2004 108 million, 2003
93 million) relates to joint ventures and associated undertakings. The cumulative translation exchange in equity at 31st December 2005
since 1st January 2003 is 217 million (2004 5 million, 2003 46 million). 2005 share based incentive plans of 240 million, includes 4
million relating to an associate undertaking.
117
Share
capital
m

continued
32 Movements in equity continued

Other reserves is analysed as follows:
ESOP Trust
shares
m
Fair value
reserve
m
Cash ow
hedge
reserve
m
Other
reserves
m
Total
m
At 1st January 2003

(2,831)
26
87
1,905
20
(926)
20
26
87

(2,718)
23
180
(21)
1,925
5
(793)
5
23
180
(21)

(2,536)
76
1,930
(606)
78
At 1st January 2005, as adjusted

(2,536)
68
155
76
2
(3)
1,930
(528)
(3)
68
155
(2,313)
76
(1)
1,930
(308)
Other reserves include the merger reserve created on the merger of Glaxo Wellcome and SmithKline Beecham amounting to 1,561 million
at 31st December 2005 (2004 1,561 million; 2003 1,561 million). Other reserves also include the capital redemption reserve created as
a result of the share buy-back programme amounting to 81 million at 31st December 2005 (2004 81 million, 2003 76 million).
33 Related party transactions

GlaxoSmithKline held an 18.4% interest in Quest Diagnostics Inc. at 31st December 2005 (2004 18.6%). The Group and Quest Diagnostics
are parties to a long-term contractual relationship under which Quest Diagnostics is the primary provider of clinical laboratory testing to support
the Groups clinical trials testing requirements worldwide. During 2005, Quest Diagnostics provided services of 39 million (2004 35 million)
to the Group. At 31st December 2005 the balance payable by GlaxoSmithKline to Quest Diagnostics was 5 million (2004 6 million).
In 2005, both the Group and Shionogi & Co. Ltd. entered into transactions with their 50/50 US joint venture company in support of the
research and development activities conducted by that joint venture company. During 2005, GlaxoSmithKline provided services to the joint
venture of 1 million (2004 1 million). At 31st December 2005 the balance due to GlaxoSmithKline from the joint venture was 1 million
(2004 2 million).
Dr Shapiro, a Non-Executive Director of GlaxoSmithKline plc, received fees of $85,000 (2004 $85,000) of which $30,000 (2004 $30,000)
was in the form of ADSs, from a subsidiary of the company, for her membership of the Groups Scientic Advisory Board. These fees are included
within Annual remuneration in the Remuneration Report on pages 37 to 54.
Dr Barzach, a former Non-Executive Director of GlaxoSmithKline plc, received fees of 84,244 (2004 83,005) from a subsidiary of the
company for healthcare consultancy provided. These are included within Annual remuneration in the Remuneration Report.
The aggregate compensation of the Directors, CET and Company Secretary is given in Note 8, Employee Costs.
118

continued
34 Acquisitions and disposals

Details of the acquisition and disposal of subsidiary and associated undertakings, joint ventures and other businesses are given below:
2005
Acquisitions
On 8th December 2005, the Group acquired 100% of the issued share capital of ID Biomedical Corporation, a biotechnology company based
in Canada specialising in the development and manufacture of vaccines, particularly inuenza vaccines, for a cash consideration of 874
million. This transaction has been accounted for by the purchase method of accounting. The goodwill arising on the acquisition results from
benets which cannot be separately quantied and recorded, including immediate access to additional u vaccines manufacturing capacity,
particularly in the event of a pandemic, a skilled workforce and good relations with the US and Canadian governments regarding the supply
of u vaccines. ID Biomedical Corporation had a turnover of 30 million (2004 23 million) and a loss of 83 million (2004 loss 17
million) for the year, of which 1 million of turnover and 11 million of loss related to the period since acquisition and are included in the
Group accounts.
Book
value
m
Net assets acquired

Intangible assets
Other assets
Other liabilities
Fair value
adjustment
m
Fair
value
m
15
88
74
(136)
686
23
(225)
(8)
701
88
97
(225)
(144)
Goodwill
41
476
357
517
357
Total consideration
41
833
874
On 12th July 2005, the Group acquired 92% of the issued share capital of Corixa Corporation, a biotechnology company specialising in
developing vaccine adjuvants and immunology based products, for a cash consideration of 150 million. This investment increased the
Groups holding in Corixa to 100%. The Group had a number of business relationships with Corixa prior to the acquisition date, principally
in relation to an adjuvant developed by Corixa and used in some of the Groups vaccines. This transaction has been accounted for by the
purchase method of accounting. The existing 8% investment in Corixa, with a book value of 12 million, was previously classied as an
available-for-sale investment and now forms part of the investment in the subsidiary. The existing 8% of the issued share capital had been
acquired, in previous years, for a cash consideration of 24 million. Corixa Corporation had a turnover of 3 million and a loss of 49 million
for the year, of which 1 million of turnover and 24 million of loss related to the period since acquisition and are included in the Group
accounts.
Book
value
m
Fair value
adjustment
m
Fair
value
m
Net assets acquired

Intangible assets
Other assets
Other liabilities
91
(95)
115
29
(4)
115
120
(99)
Goodwill
Existing investment
(4)
(12)
140
26
136
26
(12)
Total consideration
(16)
166
150
The total consideration included directly attributable costs of 1 million.
119
The total consideration included directly attributable costs of 3 million.

continued
34 Acquisitions and disposals continued

Euclid SR Partners, LP
During 2005 an additional 2 million was invested in Euclid SR Partners, LP, an associate in which the Group has a 38.7% interest.
GlaxoSmithKline Consumer Healthcare Limited
In April 2005, an Indian subsidiary of the Group purchased 3.16% of the share capital held by minority shareholders, for a cash consideration
of 16 million.
GlaxoSmithKline Pharmaceuticals Limited
In May and June 2005, an Indian subsidiary of the Group purchased 1.52% of the share capital held by minority shareholders, for a cash
consideration of 26 million.
GlaxoSmithKline Biologicals (Shanghai) Limited
During 2005, a Chinese subsidiary of the Group purchased all of the share capital held by minority shareholders for a cash consideration of 4
million.
Disposals
Ideapharm SA
In December 2005, the Group disposed of Ideapharm SA, a subsidiary located in Romania, for cash proceeds of 3 million, which were received
in January 2006. The net assets disposed of in the year included cash of 2 million.
Aseptic Technologies S.A.

In April 2005, the Group disposed of 16.22% of Aseptic Technologies S.A. to Societe Regionale dInvestissement de Wallonie S.A. for cash
proceeds of 10 million.
GSK
Biologicals
(Shanghai)
m
Aseptic
Tech.
m
GSK
Pharmaceuticals
m
GSK
Consumer
Healthcare
m
Ideapharm
m
Euclid
SR
m
Cash consideration
Cash and cash equivalents acquired
26
16
Net cash payment on acquisitions
26
16
Cash and cash equivalents disposed
Net cash proceeds from disposals
10
Cash flows
120
ID
Biomedical
m
Total
150
(7)
874
9
1,072
2
143
883
1,074
10
Corixa
m

continued

2004
Acquisitions
Fraxiparine, Fraxodi and Arixtra
In September 2004, the Group acquired Fraxiparine, Fraxodi and Arixtra and related assets including a manufacturing facility for a cash
consideration of 297 million.
Book
value
m
Intangible assets
Tangible xed assets
Inventory
Provisions for onerous contracts
Fair value
adjustment
m
Net assets
acquired
m
56
79
262
(24)
(76)
262
32
79
(76)
135
162
297
Euclid SR Partners, LP
During 2004 an additional 2 million was invested in Euclid SR Partners, LP, an associate company in which the Group has a 38.7% interest.
Disposals
Quest Diagnostics Inc.
During 2004, the Group disposed of 3.8 million shares from its investment in Quest Diagnostics Inc. for cash proceeds of 188 million, reducing
the Groups shareholding at 31st December 2004 to 18.6%. A prot of 150 million was recognised.
GlaxoSmithKline Vehicle Finance Ltd
During 2004, the Group disposed of its employee vehicle nancing subsidiary resulting in a loss of 3 million.
Beeyar Investments (Pty) Ltd

In July 2004, the Group disposed of Beeyar Investments (Pty) Ltd, a subsidiary located in South Africa, for cash proceeds of 1 million, realising
a prot of 1 million.
OptiLead S.r.l.
During the year, part of the Groups holding in an associated undertaking, OptiLead S.r.l. was sold, resulting in a loss of 1 million.
Cash flows
Cash consideration paid
Fraxiparine
Fraxodi
and Arixtra
m
Euclid SR
m
Quest
Diagnostics
m
GSK
Vehicle
Finance
m
GSK
Pharmaceuticals
(Chongqing)
m
Beeyar
Investments
m
Total
m
297
299
188
34
230
121
GlaxoSmithKline Pharmaceuticals (Chongqing) Ltd

During 2004, the Group disposed of GlaxoSmithKline Pharmaceuticals (Chongqing) Ltd, a Group subsidiary located in China, for 7 million.
A prot on disposal of 2 million was realised.

continued

2003
Acquisitions
Europharm
During 2003, the Group completed the buyout of the minority interests in Europharm Holdings SA, a Group subsidiary located in Romania,
for 3 million, giving rise to goodwill of a further 2 million, which has been capitalised.
Europharm
Book
values
m
Fair value
adjustments
m
Net assets
acquired
m
Goodwill
capitalised
m
Cost of
acquisition
m
Iterfi Sterilyo
During 2003, a further payment of 9 million was made pursuant to the 2002 acquisition agreement based on the nancial performance of
the acquired company. This amount has been included as deferred compensation in 2002.
Disposals
SB Clinical Laboratories
An additional cash refund of 3 million was received during 2003 in respect of indemnied liabilities arising from the SB Clinical Laboratories
disposal which occurred in 1999. This refund follows the successful outcome of a case in the US Court of Appeal.
IterSterilyo
m
Europharm
m
SB Clinical
Laboratories
m
Other
m
Total
m
Cash consideration paid
15
2005
m
2004
m
1,833
376
2,200
64
3,067
1,278
213
84
2,648
7,540
4,223
Cash flows
35 Commitments
Contractual obligations and commitments

Contracted for but not provided in the nancial statements:
Intangible assets
Plant, property and equipment
Pensions
Other commitments
Interest on loans
A number of commitments were made in 2005 under licensing and other agreements, principally with Vertex Pharmaceuticals Inc. The
commitments related to intangible assets include milestone payments, which are dependent on successful clinical development and which
represent the maximum that would be paid if all milestones are achieved.
GSK has agreed with the trustees of the UK and US pension schemes to make additional contributions of approximately 370 million per year
over a ve-year period ending 31st December 2009 in order to eliminate the pension decits on a IAS 19 basis, by that point. The table shows
this commitment, which on the basis of the decits at 31st December 2005 amounts to total contributions (normal plus additional) of
approximately 550 million per year. No commitments have been made past 31st December 2009.
The Group also has other commitments relating to revenue payments to be made under licences and other alliances, principally to Exelixis Inc.
Commitments in respect of future interest payable on loans are disclosed after taking into account the effect of interest rate swaps.
Commitments under operating leases
2005
m
2004
m
Rental payments due within one year

Rental payments due between one and two years
Rental payments due between two and three years
Rental payments due between three and four years
Rental payments due between four and ve years
Rental payments due after ve years
111
78
60
45
40
103
83
73
54
42
36
119
Total commitments under operating lease
437
407
122

continued
36 Financial instruments and related disclosures
Borrowings denominated in, or swapped into, foreign currencies that

match investments in overseas Group assets are treated as a hedge
against the relevant net assets.
Financial risk management

GlaxoSmithKline plc reports in sterling and pays dividends out of
sterling profits. The role of Corporate Treasury in GSK is to manage
and monitor the Groups external and internal funding requirements
and financial risks in support of Group corporate objectives. Treasury
activities are governed by policies and procedures approved by the
Board and monitored by a treasury management group.
At 31st December 2005, the Group had outstanding contracts to sell

or purchase foreign currency having a total gross notional principal
amount of 15,974 million (2004 11,137 million). The majority of
contracts are for periods of 12 months or less.
Based on the composition of net debt at 31st December 2005, a 10%
appreciation in sterling against major currencies would result in a
reduction in the Groups net debt of approximately 61 million. A
10% weakening in sterling against major currencies would result in
an increase in the Groups net debt of approximately 75 million.
GSK maintains treasury control systems and procedures to monitor

foreign exchange, interest rate, liquidity, credit and other financial risks.
GSK uses a variety of financial instruments, including derivatives, to
finance its operation and to manage market risks from these
operations. Financial instruments include cash and liquid resources,
borrowings and spot foreign exchange contracts.

GSKs policy on interest rate risk management requires that the
amount of net borrowings at fixed rates increases with the ratio of
forecast net interest payable to trading profit.
A number of derivative financial instruments are used to manage the

market risks from Treasury operations. Derivative instruments,
principally comprising forward foreign currency contracts and interest
rate and currency swaps, are used to swap borrowings and liquid
assets into the currencies required for Group purposes and to manage
exposure to funding risks from changes in foreign exchange rates and
interest rates.
The Group uses a limited number of interest rate swaps to

redenominate external borrowings into the interest rate coupon
required for Group purposes. The duration of these swaps matches
the duration of the principal instruments. Interest rate derivative
instruments are accounted for as fair value or cash flow hedges of the
relevant assets or liabilities.
GSK balances the use of borrowings and liquid assets having regard
to the cash flow from operating activities and the currencies in which
it is earned; the tax cost of intra-Group distributions; the currencies
in which business assets are denominated; and the post-tax cost of
borrowings compared to the post-tax return on liquid assets.
Sensitivity analysis considers the sensitivity of the Groups net debt to

hypothetical changes in market rates and assumes that all other
variables remain constant. Based on the composition of net debt and
financing arrangements at 31st December 2005, and taking into
consideration all fixed rate borrowings in place, a one percentage
point (100 basis points) decrease in average interest rates would result
in an increase in the Groups annual net interest charge of
approximately 19 million.
Liquid assets surplus to the immediate operating requirements of

Group companies are generally invested and managed centrally by
Corporate Treasury. Requirements of Group companies for operating
finance are met whenever possible from central resources.
External borrowings, mainly managed centrally by Corporate Treasury,
comprise a portfolio of long and medium-term instruments and shortterm finance.
Market risk of financial assets

The Group invests centrally managed liquid assets in government
bonds, short-term corporate debt instruments with a minimum
short-term credit rating of A-1/P-1, money market funds with a
credit rating of AAA/Aaa and other structured investments (credit
ratings shown are from Standard and Poors and Moodys Investors
Services, respectively). These investments are classified as availablefor-sale.
GSK does not hold or issue derivative financial instruments for

trading purposes and the Groups Treasury policies specifically
prohibit such activity. All transactions in financial instruments are
undertaken to manage the risks arising from underlying business
activities, not for speculation.

In GSK foreign currency transaction exposure arising on normal trade
flows, in respect of both external and intra-Group trade, is not
hedged. GSKs policy is to minimise the exposure of overseas
operating subsidiaries to transaction risk by matching local currency
income with local currency costs. For this purpose, intra-Group trading
transactions are matched centrally and intra-Group payment terms are
managed to reduce risk. Exceptional foreign currency cash flows are
hedged selectively under the management of Corporate Treasury.
Equity investments are classified as available-for-sale investments and

the Group manages disposals to meet overall business requirements
as they arise. The Group regularly monitors the value of its equity
investments and only enters into hedges selectively with the approval
of the Board.
Credit risk
In the USA, in line with other pharmaceutical companies, the Group
sells its products through a small number of wholesalers in addition
to hospitals, pharmacies, physicians and other groups. Sales to the
three largest wholesalers amounted to approximately 80% of the
Groups US pharmaceutical sales. At 31st December 2005, the Group
had trade receivables due from these three wholesalers totalling
1,051 million (31st December 2004 710 million).
A significant proportion of Group borrowings, including the

commercial paper programme, is in US dollars, to benefit from the
liquidity of US dollar denominated capital markets. Certain of these
and other borrowings are swapped into other currencies as required
for Group purposes. The Group seeks to denominate borrowings in
the currencies of its principal assets and cash flows.
123
The Group manages centrally the short-term cash surpluses or

borrowing requirements of subsidiary companies and uses forward
contracts to hedge future repayments back into originating currency.

continued
36 Financial instruments and related disclosures

continued
Equity investments investments traded in an active market,

determined by reference to the relevant stock exchange quoted bid
price; other investments determined by reference to the current
market value of similar instruments or by reference to the discounted
cash flows of the underlying net assets
Cash and cash equivalents approximates to the carrying amount
Liquid investments based on quoted market prices in the case of
marketable securities; based on principal amounts in the case of
non-marketable securities because of their short repricing periods
Short-term loans and overdrafts approximates to the carrying
amount because of the short maturity of these instruments
Long-term loans based on quoted market prices in the case of the
Eurobonds and other fixed rate borrowings; approximates to the
carrying amount in the case of floating rate bank loans and other
loans
Forward exchange contracts based on market prices and exchange
rates at the balance sheet date
Currency swaps based on market valuations at the balance
sheet date
Quest equity collar and Theravance put and call options based
on an option pricing model which uses significant assumptions in
respect of price volatility, dividend yield and interest rates
Interest rate instruments based on the net present value of
discounted cash flows
Receivables and payables approximates to the carrying amount
Provisions approximates to the carrying amount
Lease obligations approximates to the carrying value.
The Group is exposed to a concentration of credit risk in respect of

these wholesalers such that, if one or more of them is affected by
financial difficulty, it could materially and adversely affect the Groups
financial results.
The Group does not believe it is exposed to major concentrations of
credit risk on other classes of financial instruments. The Group is
exposed to credit-related losses in the event of non-performance by
counterparties to financial instruments, but does not expect any
counterparties to fail to meet their obligations. Where the Group has
significant investments with a single counterparty, collateral is
obtained in order to reduce risk.
The Group applies Board-approved limits to the amount of credit
exposure to any one counterparty and employs strict minimum credit
worthiness criteria as to the choice of counterparty.
Liquidity
The Group operates globally, primarily through subsidiary companies
established in the markets in which the Group trades. Due to the
nature of the Groups business with patent protection on many
products in the Groups portfolio, the Groups products compete
largely on product efficacy rather than on price. Selling margins are
sufficient to exceed normal operating costs and the Groups operating
subsidiaries are substantially cash generative.
Operating cash flow is used to fund investment in the research and
development of new products as well as routine outflows of capital
expenditure, tax, dividends and repayment of maturing debt. The
Group may, from time to time, have additional demands for finance,
such as for share purchases and acquisitions.
In the year ended 31st December 2005, the total amount of the
change in fair values estimated using valuation techniques referred to
above resulted in a credit to the income statement of 1 million.
Fair value of investments in GSK shares

At 31st December 2005 the ESOP Trusts held GSK ordinary shares
with a carrying value of 2,313 million (2004 2,574 million) with
a fair value of 2,459 million (2004 2,123 million) based on quoted
market price. The shares represent purchases by the ESOP Trusts to
satisfy future exercises of options and awards under employee
incentive schemes. The carrying value, which is the lower of cost or
expected proceeds, of these shares has been recognised as a
deduction from other reserves. At 31st December 2005, GSK held
Treasury shares at a cost of 1,799 million (2004 799 million) which
has been deducted from retained earnings.
GSK operates with a high level of interest cover and at low levels of
net debt relative to its market capitalisation. In addition to the strong
positive cash flow from normal trading activities, additional liquidity
is readily available via its commercial paper programme and shortterm investments. The Group also has a European Medium Term Note
programme of 5 billion, of which 3.5 billion was in issue at 31st
December 2005. In March 2004, the Group established a US Shelf
Registration of $5 billion; at 31st December 2005 $2.4 billion (1.4
billion) was in issue.
Fair value of financial assets and liabilities

The table on page 125 presents the carrying amounts under IFRS and
the fair values of the Groups financial assets and liabilities at 31st
December 2005. Comparative information is presented in the table
on page 129. The carrying amounts at 31st December 2004 are
recorded on the UK GAAP basis applicable at that date rather than
in accordance with IAS 32 and IAS 39 as described in Note 1.
Committed facilities
The Group has committed facilities to back up the commercial paper
programme of $900 million (523 million) (2004 $900 million (469
million)) of 364 days duration, renewable annually. At 31st December
2005, undrawn committed facilities totalled $900 million (523
million) (2004 $900 million (469 million)).
The fair values of the financial assets and liabilities are included at the
amount at which the instrument could be exchanged in a current
transaction between willing parties, other than in a forced or
liquidation sale. The following methods and assumptions were used
to estimate the fair values:
124

continued
36 Financial instruments and related disclosures continued

2005 IFRS disclosures
The Group adopted IAS 32 and IAS 39 on 1st January 2005. The following disclosures are included as at 31st December 2005 to meet the
requirements of IAS 32.
Carrying
value
m
Fair
value
m
Liquid investments
1,025
4,209
1,025
4,209
Current asset financial instruments
5,234
5,234
notes and bonds
(976)
(1,097)
(1,929)
(502)
54
(47)
(1,932)
(501)
54
(47)
(2,424)
(2,426)
(342)
10
(348)
10
(332)
(338)
(1,702)
5
(1,705)
5
(1,697)
(1,700)
(909)
(111)
(909)
(111)
Total borrowings and related swaps
(6,449)
(6,581)
Equity investments
Receivables
Payables
Provisions
Other derivatives assets
Other derivatives liabilities
Other financial assets
Other financial liabilities
362
4,934
(4,754)
(1,533)
126
(150)
271
(391)
362
4,934
(4,754)
(1,533)
126
(150)
271
(391)
US$ notes, bonds and private financing

Notes and bonds swapped into US$
Currency swaps
Interest rate swaps
Notes swapped into Yen
Currency swaps
notes
Interest rate swap
Other short-term borrowings

Other long-term borrowings
Total financial assets and liabilities
(2,350)
(2,482)
Total financial assets
10,996
10,996
(13,346)
(13,478)
Liquid investments
Total borrowings
1,025
4,209
(6,449)
1,025
4,209
(6,581)
Less net effect of interest rate and currency swaps
(1,215)
(22)
(1,347)
(22)
Net debt
(1,237)
(1,369)
Total financial liabilities

Reconciliation to net debt
125
Classification and fair values of financial assets and liabilities

The following table sets out the classification of financial assets and liabilities. Receivables and payables have been included to the extent they
are classified as financial assets and liabilities in accordance with IAS 32. Provisions have been included where there is a contractual obligation
to settle in cash. Where appropriate, currency and interest rate swaps have been presented alongside the underlying principal instrument. The
carrying amounts of these instruments have been adjusted for the effect of the currency and interest rate swaps acting as hedges.

continued

Interest rate profiles of financial assets and liabilities
The following tables set out the exposure of financial assets and liabilities to either fixed interest rates, floating interest rates or no interest
rates. The maturity profile of financial assets and liabilities exposed to interest rate risk in the tables below indicates the contractual repricing
and maturity dates of these instruments.
Investments
m
Liquid
investments
m
Cash and
cash
equivalents
m
Less than one year

Between four and five years
Greater than five years
1,025
Total interest earning
Analysed as:
Fixed rate interest
Floating rate interest
Total interest earning

Financial assets
Total
m
4,188
204
8
13
12
94
117
5,511
8
13
12
117
1,025
4,188
237
211
5,661
292
733
4,188
207
30
117
94
616
5,045
1,025
4,188
237
211
5,661
Non-interest earning
362
21
4,697
255
5,335
Total
362
1,025
4,209
4,934
466
10,996
Effect of
interest rate
swaps
m
Obligations
under finance
leases
m
Payables
m
Provisions
m
Other
financial
liabilities
m
Total
m

Financial liabilities
Receivables
m
Other
financial
assets
m
Debt
m
Less than one year

Greater than five years
(1,176)
(287)
(1,190)
(343)
(3,354)
(2,348)
291
1,185
872
(103)
(3)
(3)
(2)
(2)
(8)
(148)
(61)
(23)
(3,836)
(22)
(8)
(345)
(2)
(2,490)
Total interest bearing
(6,350)
(121)
(148)
(84)
(6,703)
Analysed as:
Fixed rate interest
Floating rate interest
(5,527)
(823)
2,348
(2,348)
(21)
(100)
(148)
(24)
(60)
(3,224)
(3,479)
Total interest bearing
(6,350)
(121)
(148)
(84)
(6,703)
(4,606)
(1,533)
(504)
(6,643)
(6,350)
(121)
(4,754)
(1,533)
(588)
(13,346)
Non-interest bearing
Total
Maturity analysis of interest earning financial assets

The maturity analysis of interest earning financial assets is equivalent to the maturity analysis presented in the interest rate profile table above.
Maturity analysis of interest bearing financial liabilities
Debt
m
Within one year or on demand

After five years
Payables
m
Other
financial
liabilities
m
Total
m
(1,162)
(287)
(1,203)
(343)
(1)
(3,354)
(38)
(30)
(21)
(11)
(8)
(13)
(148)
(61)
(23)
(1,409)
(340)
(1,224)
(354)
(9)
(3,367)
(6,350)
(121)
(148)
(84)
(6,703)
126
Finance
leases
m

continued

Currency profiles of financial assets and liabilities
The Groups currency exposures that give rise to net currency gains and losses that are recognised in the income statement arise principally in
companies with sterling functional currency. The table below sets out these exposures on financial assets and liabilities held in currencies other
than the functional currencies of Group companies after the effect of currency swaps.
Financial assets
Investments
Receivables

Debt
Obligations under finance lease
Payables
Provisions
Sterling
m
US$
m
Euro
m
Yen
m
Other
m
Total
m
8
1
7
108
46
123
3
10
89
11
19
91
130
78
310
16
277
102
121
518
Sterling
m
US$
m
Euro
m
Yen
m
Other
m
Total
m
(7)
(2)
(18)
(56)
(497)
(13)
(1)
(30)
(497)
(2)
(69)
(56)
(7)
(76)
(510)
(1)
(30)
(624)

The table below sets out the net principal amount and fair value of derivative contracts held by GSK:
Fair value
Currency and interest related instruments:

Foreign exchange contracts
Cross currency swaps
Interest rate swaps
(4,665)
842
1,848
Equity related instruments:

Options and warrants
Equity collar
290
299
Embedded derivatives
34
Total derivative financial instruments
Assets
2005
m
Liabilities
2005
m
102
64
5
(85)
(47)
21
(49)
(14)
(2)
195
(197)
In 2002, GSK hedged part of the equity value of its holdings in its largest equity investment Quest Diagnostics Inc. through a series of variable
sale forward contracts. The contracts (the equity collar) are structured in five series, each over one million Quest shares, and mature between
2006 and 2008.
The Group has entered into a put option agreement whereby Theravances shareholders can sell up to half of their Theravance shares to GSK at
a pre-determined price ($19.375). Given the maximum number of shares subject to the put option, the Groups obligation is capped at $525
million. At 31st December 2005, this option is recorded as a liability of $81 million (2004 $132 million). As at 31st December 2005, the
maximum potential exposure to GSK from fair value movements of these options is therefore approximately $444 million. The expiry date is
August 2007.
The Group has entered into a call option agreement whereby it can purchase half of the outstanding Theravance shares in issue at a predetermined price ($54.25). At 31st December 2005, this option is recorded as an asset of $28 million (2004 $31 million). As at 31st December
2005, the maximum potential exposure to GSK from fair value movements of this option is therefore $28 million. The expiry date is July 2007.
127
Contract or underlying
principal amount
2005
m

continued

The following table sets out the principal amount and fair values of derivative contracts which qualify for hedge accounting treatment
Cash flow hedges:

Contract or underlying
principal amount
Fair value of
derivative contract
2005
m
2005
m
342
10
Fair value hedges:

Interest rate swaps
2,151
1,848
500
74
(42)
3
Net investment hedges:

(6,816)
500
(57)
51
Cash flow hedges

The Group has entered into a cross currency swap and designated it a cash flow hedge converting fixed Euro coupons, payable annually, to
fixed Yen payments. The bond matures in 2009. The risk being hedged is the variability of cash flows arising from currency fluctuations.
Fair value hedges
Foreign exchange contracts, designated as fair value hedges, have been entered in order to hedge the foreign currency risk associated with
intercompany loans and deposits, commercial paper borrowings and other liabilities.
The Group has designated interest rate swaps and the interest element of cross currency swaps as fair value hedges. The risk being hedged is
the variability of the fair value of the bonds arising from interest rate fluctuations.
Net investment hedges

Foreign exchange contracts and the currency element of cross currency swaps have been designated as net investment hedges in respect of
the foreign currency translation risk arising on consolidation of the Groups net investment in its US dollar, Euro and Yen foreign operations.
2004 UK GAAP disclosures
The Group exercised the IFRS 1 exemption to record financial instruments in the comparative period on the existing UK GAAP basis. The
following disclosures are included, as at 31st December 2004 to meet the requirements of Financial Reporting Standard 13 Derivatives and
other financial instruments: disclosures.
UK GAAP accounting policy for derivative financial instruments
The Group does not hold or issue derivative financial instruments for trading purposes.
Derivative financial instruments are used to manage exposure to market risks from treasury operations. The principal derivative instruments
are currency swaps, forward foreign exchange contracts and interest rate swaps. The derivative contracts are treated from inception as an
economic hedge of the underlying financial instrument, with matching accounting treatment and cash flows. The derivative contracts have a
high correlation with the specific financial instrument being hedged both at inception and throughout the hedge period. Derivative instruments
no longer designated as hedges are restated at market value and any future changes in value are taken directly to the income statement.
Currency swaps and forward foreign exchange contracts used to fix the value of the related asset or liability in the contract currency and at
the contract rate are accrued to the income statement over the life of the contract.
Gains and losses on foreign forward exchange contracts designated as hedges of forecast foreign exchange transactions are deferred and
included in the measurement of the related foreign currency transactions in the period they occur. Gains and losses on balance sheet hedges
are accrued and are taken directly to reserves, except that forward premiums/discounts are recognised as interest over the life of the contracts.
Interest differentials under interest swap agreements are recognised in the income statement by adjustment of interest expense over the life
of the agreement.
128

continued

Net debt
Carrying
value
m
Fair
value
m
Liquid investments
1,512
2,467
1,514
2,467
Current asset financial instruments
3,979
3,981
notes and bonds
(1,475)
(1,533)
(1,475)
(1,533)
US$ notes, bonds and private financing

Notes and bonds swapped into US$
Currency swaps
Interest rate swaps
(1,828)
(498)
(1,817)
(497)
92
(28)
(2,326)
(2,250)
(348)
(338)
10
(348)
(328)
(705)
(717)
12
(705)
(705)
Other long-term borrowings

Other short-term loans and overdrafts
(79)
(1,030)
(79)
(1,030)
Total borrowings and related swaps
(5,963)
(5,925)
Total net debt
(1,984)
(1,944)
298
597
(244)
(256)
(67)
350
499
(244)
(256)
(79)
(59)
Total financial assets and liabilities
(1,656)
(1,733)
Total financial assets
4,874
4,830
Total financial liabilities
(6,530)
(6,563)
Notes swapped into Yen

Currency swaps
notes
Interest rate swap
Equity investments
Receivables
Payables
Provisions
Other foreign exchange derivatives
Non-hedging derivatives
129
Classification and fair values of financial assets and liabilities

The following table sets out the classification of financial assets and liabilities and provides a reconciliation to Group net debt in Note 30. Shortterm payables and receivables have been excluded from financial assets and liabilities. Provisions have been included where there is a contractual
obligation to settle in cash. Where appropriate, currency and interest rate swaps have been presented alongside the underlying principal
instrument. The carrying amounts of these instruments have been adjusted for the effect of the currency and interest rate swaps acting as
hedges.

continued

Currency and interest rate risk profile of financial liabilities
Financial liabilities, after taking account of currency and interest rate swaps, are analysed below.
Total financial liabilities comprise total borrowings of 5,963 million, other long-term payables of 244 million and provisions of 256 million
but exclude short-term payables and foreign exchange derivatives of 67 million.
The benchmark rate for determining interest payments for all floating rate financial liabilities in the tables below is LIBOR.
Fixed rate

Currency
US$
Sterling
Euro
Yen
Other currencies
Floating rate
Non-interest
bearing
Total
m
Weighted
average
interest
rate
%
Weighted
average
years for
which rate
is fixed
Weighted
average
years to
maturity
571
1,489
348
5.9
6.4
0.4
13.8
19.3
4.6
1,764
842
747
89
411
123
44
35
8.9
2.1
5.3
6.1
2,746
2,454
791
348
124
2,408
5.4
15.9
3,442
613
4.6
6,463
Currency and interest rate risk profile of financial assets

Total financial assets comprise other investments of 298 million, liquid investments of 1,512 million, cash and cash equivalents of 2,467
million and long-term receivables of 597 million. The benchmark rate for determining interest receipts for all floating rate assets in the tables
below is LIBID.
Fixed rate
Floating rate
Non-interest
bearing
Weighted
average
years for
which rate
is fixed
Total
m

Currency
Fixed
rate
m
Weighted
average
interest
rate
%
US$
Sterling
Euro
Yen
Other currencies
164
155
6.2
3.0
11.9
0.2
1,429
1,088
629
1
353
757
89
57
28
124
2,350
1,177
686
29
632
319
4.7
6.2
3,500
1,055
4,874
130

continued

Currency exposure of net monetary assets/(liabilities)
The Groups currency exposures that give rise to net currency gains and losses that are recognised in the income statement arise principally in
companies with sterling functional currency. Monetary assets and liabilities denominated in overseas functional currency and borrowings
designated as a hedge against overseas net assets are excluded from the table below.
Net monetary assets/(liabilities)
held in non-functional currency
Functional currency of Group operation

Sterling
m
Sterling
US$
Euro
Yen
Other
US$
m
Euro
m
_
234
(97)
29
39
(15)
(8)
(53)
18
1
(4)
205
(18)
(38)
Yen
m
Other
m
Total
m
(1)
(130)
(23)
(46)
1
(178)
228
(158)
31
27
(1)
(198)
(50)
Debt
m
Finance
leases
m
Other
m
Total
2004
m
1,547
262
1,817
2,244
35
27
24
7
120
88
132
227
1,702
377
1,973
2,478
5,870
93
567
6,530
Hedges
Gains
m
Losses
m
Unrecognised gains and losses at the beginning of the year

Unrecognised gains and losses arising in previous years and recognised in the year
Unrecognised gains and losses arising in the year
171
(27)
8
(60)
(77)
111
(27)
(69)
Total unrecognised gains and losses at the end of the year
152
(137)
15
Expected to be recognised within one year

Expected to be recognised after one year
152
(9)
(128)
(9)
24
Total unrecognised gains and losses at the end of the year
152
(137)
15
Maturity of financial liabilities

Within one year or on demand
Between two and five years
After five years
2004
The unrecognised gains and losses above represent the difference between the carrying amount and the fair value of the currency
swaps, interest rate swaps, equity collar and other foreign exchange derivatives.
Impact of IAS 32 and IAS 39 adoption on comparative information

The nature of the main adjustment that would make the comparative information comply with IAS 32 and IAS 39 would be the recognition
at fair value of financial instruments classified as fair valued through profit and loss and as available-for-sale.
131
Net
m

continued
37 Employee share schemes

The Group operates share option schemes, whereby options are granted to employees to acquire shares or ADSs in GlaxoSmithKline plc
at the grant price, and share award schemes, whereby awards are granted to employees to acquire shares or ADSs in GlaxoSmithKline plc at
no cost, subject to the achievement by the Group of specified performance targets. In 2004, the Group introduced a new share award scheme,
the Restricted Share Plan, whereby awards are granted to employees to acquire shares or ADSs in GlaxoSmithKline plc at no cost after a three
year vesting period. The granting of restricted share awards has replaced the granting of options to certain employees as the cost of the
scheme more readily equates to the potential gain to be made by the employee.
The Group operates share option schemes and savings-related share option schemes. Grants under share option schemes are normally exercisable
between three and ten years from the date of grant. Grants of restricted shares and share awards are normally exercisable at the end of the
three year vesting/performance period. Grants under savings-related share option schemes are normally exercisable after three years saving.
Options under the share option schemes are normally granted at the market price ruling at the date of grant. In accordance with UK practice, the
majority of options under the savings-related share option schemes are granted at a price 20% below the market price ruling at the date of grant.
Share options awarded to the Directors and, with effect from the 2004 grant, the CET are subject to performance criteria as laid out in the
Remuneration Report.
Option pricing
For the purposes of valuing options to arrive at the stock-based compensation charge, the Black-Scholes option pricing model has been used.
The assumptions used in the model for 2003, 2004 and 2005 are as follows:
Risk-free interest rate

Dividend yield
Volatility
Expected lives of options granted under:
Share option schemes
Savings-related share option schemes
Weighted average share price for grants in the year:
Ordinary shares
ADSs
2005
2004
2003
4.0% 4.8%
3.0%
21% 28%
3.3% 4.6%
3.2%
26% 29%
4.2% 4.9%
2.9%
34%
5 years
3 years
5 years
3 years
5 years
3 years
13.15
$47.42
11.25
$43.23
12.66
$43.39
Volatility was determined based on the three year share price history. The fair value of performance share plan grants take into account market
conditions. Expected lives of options were determined based on weighted average historic exercises of options.
The stock-based compensation charge has been recorded in the income statement as follows:
Cost of sales
Share option
schemes shares
Options outstanding
Number
000
Weighted
exercise
price
At 1st January 2003

Options granted
Options exercised
Options cancelled
197,472
32,750
(4,728)
(19,789)
15.20
12.88
7.92
16.48

Options granted
Options exercised
Options cancelled
205,705
9,837
(5,764)
(11,997)
14.89
11.23
6.54
15.33

Options granted
Options exercised
Options cancelled
197,781
516
(10,483)
(20,888)
14.92
12.57
9.91
17.16
166,926
14.97
Range of exercise prices
Number
000
Weighted
exercise
price
90,877
23,630
(1,828)
(6,150)
$47.34
$43.36
$24.33
$52.65
106,529
9,222
(1,845)
(3,427)
$46.58
$42.99
$25.65
$48.28
110,479
956
(7,537)
(8,306)
$46.57
$45.66
$38.83
$50.26
95,592
$46.86
3.13
2.76
2004
2003
17
150
69
35
207
91
42
224
109
236
333
375
Share option
schemes ADSs
Weighted
fair
value
2.49
2005
5.61 19.77
$22.32 $61.35
The average share price in 2005 was 13.42 and $48.88

132
Weighted
fair
value
$10.92
$8.54
$9.90
Savings-related
share option schemes
Number
000
Weighted
exercise
price
12,988
1,416
(112)
(3,709)
10.29
10.20
10.23
12.23
10,583
1,580
(232)
(1,790)
9.59
9.52
9.18
10.46
10,141
5,167
(5,732)
(810)
9.44
11.45
9.16
11.02
8,766
10.66
9.16 11.45
Weighted
fair
value
4.15
3.30
3.68

continued
37 Employee share schemes continued

In order to encourage employees to convert options, excluding savings-related share options, held over Glaxo Wellcome or SmithKline
Beecham shares or ADSs, into those over GlaxoSmithKline shares or ADSs, a programme was established to give an additional cash benefit
of 10% of the exercise price of the original option provided that the employee did not voluntarily leave the Group for two years from the
date of the merger and did not exercise the option before the earlier of six months from the expiry date of the original option and two years
from the date of the merger. The cash benefit will also be paid if the options expire unexercised if the market price is below the exercise price
on the date of expiry.
Share option
schemes shares
Options outstanding
Share option
schemes ADSs
Savings-related
Number
000
Weighted
exercise
price
Latest
exercise
date
Number
000
Weighted
exercise
price
Latest
exercise
date
Number
000
Exercise
price
Latest
exercise
date
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2,015
6,059
14,654
15,739
16,451
45,323
28,077
28,876
9,502
230
8.44
11.71
16.91
18.19
14.88
18.12
11.94
12.66
11.23
13.04
01.12.06
13.11.07
23.11.08
01.12.09
11.09.10
28.11.11
03.12.12
15.12.13
02.12.14
31.10.15
592
2,876
5,556
7,096
334
31,169
16,642
21,597
9,243
487
$28.04
$40.23
$54.26
$60.13
$58.88
$51.84
$37.54
$43.42
$43.03
$47.33
21.11.06
13.11.07
23.11.08
24.11.09
16.03.10
28.11.11
03.12.12
15.12.13
02.12.14
31.10.15
1,429
789
1,390
5,158
9.16
10.20
9.52
11.45
31.05.06
31.05.07
31.05.08
31.05.09
Total
166,926
14.97
95,592
$46.86
8,766
10.66
Year of grant
All of the above options are exercisable, except all options over shares and ADSs granted in 2003, 2004 and 2005 and the savings-related
share options granted in 2003, 2004 and 2005.
There has been no change in the effective exercise price of any outstanding options during the year.
Share option
schemes ADSs
Savings-related
Number
000
Weighted
exercise
price
Number
000
Weighted
exercise
price
Number
000
Weighted
exercise
price
79,693
14.56
22,364
$49.82
192
16.48
126,917
16.49
57,421
$51.75
270
14.12
128,316
15.77
64,265
$48.56
1,429
9.16
GlaxoSmithKline share award schemes

Performance Share Plan
The Group operates a Performance Share Plan whereby awards are granted to Directors and senior executives at no cost. The percentage of
each award that vests is based upon the performance of the Group over a three year measurement period. The performance conditions consist
of two parts, each of which applies to 50% of the award. For awards granted in 2003, the first part of the condition compares GlaxoSmithKlines
Total Shareholder Return (TSR) over the period with the TSR of companies in the UK FTSE 100 Index over the same period. For awards granted
in 2004, and subsequent years, the first part of the condition compares GlaxoSmithKlines TSR over the period with the TSR of 13 pharmaceutical
companies in the comparator group over the same period. The second part of the performance condition compares GlaxoSmithKlines earnings
per share growth to the increase in the UK Retail Prices Index over the three year performance period. Awards granted to Directors and
members of the CET from 15th December 2003 are subject to a single performance condition which compares GlaxoSmithKlines TSR over
the period with the TSR of companies in the comparator group over the same period.
133
Share option
schemes shares
Options exercisable

continued
37 Employee share schemes continued

Shares
Number (000)
Number of shares and ADSs issuable

At 1st January 2003
Awards granted
Awards exercised
Awards cancelled
3,164
1,070
(625)
(109)

Awards granted
Awards exercised
Awards cancelled
3,500
1,778
(409)
(520)

Awards granted
Awards exercised
Awards cancelled
4,349
130
(375)
(477)
3,627
Weighted
fair value
7.00
7.25
9.02
ADSs
Number (000)
1,943
832
(189)
(107)
2,479
1,339
(187)
(276)
3,355
88
(199)
(237)
Weighted
fair value
$20.14
$23.89
$32.34
3,007
Restricted Share Plan

The Group operates a Restricted Share Plan whereby awards are granted, in the form of shares, to certain employees at no cost. The awards
vest after three years. There are no performance criteria attached.
Shares
Number (000)
Weighted
fair value
ADSs
Number (000)
Weighted
fair value
At 1st January 2004

Awards granted
4,419
10.07
3,562
$38.14

Awards granted
Awards exercised
Awards cancelled
4,419
403
(138)
(170)
4,514
Number of shares and ADSs issuable
12.00
3,562
511
(143)
(81)
$44.39
3,849
Employee Share Ownership Plan Trusts

The Group sponsors Employee Share Ownership Plan (ESOP) Trusts to acquire and hold shares in GlaxoSmithKline plc to satisfy awards made
under employee incentive plans and options granted under employee share option schemes. The trustees of the ESOP Trusts purchase shares
on the open market with finance provided by the Group by way of loans or contributions. Costs of running the ESOP Trusts are charged to the
income statement. Shares held by the ESOP Trusts are deducted from other reserves and held at the value of proceeds receivable from employees
on exercise. If there is deemed to be a permanent diminution in value this is reflected by a transfer to retained earnings.
Shares held for share award schemes
2005
2004
22,169
22,992
Nominal value
Carrying value
Market value
6
116
326
6
213
281
Shares held for share option schemes
2005
2004
145,267
151,535
36
2,197
2,134
38
2,361
1,852
Number of shares (000)
Number of shares (000)
Nominal value
Carrying value
Market value
The Trusts also acquire and hold shares to meet notional dividends re-invested on deferred awards under the SmithKline Beecham Mid-Term
Incentive Plan. The trustees have waived their rights to dividends on the shares held by the ESOP Trusts.
134

continued
38 Reconciliation to US accounting principles
Like IFRS 3, SFAS 142 requires that goodwill must not be amortised
and that annual impairment tests of goodwill must be undertaken.
The implementation of SFAS 142 in 2002, a year earlier than the
Groups transition to IFRS, results in goodwill balances acquired
between 1998 and 2003 reflecting one year less of amortisation
under US GAAP than under IFRS.
The analyses and reconciliations presented in this Note represent the

financial information prepared on the basis of US Generally Accepted
Accounting Principles (US GAAP) rather than IFRS.
Summary of material differences between IFRS and US

GAAP
Acquisition of SmithKline Beecham
The Group has exercised the exemption available under IFRS 1 Firsttime Adoption of IFRS not to restate business combinations prior to
the date of transition of the Groups reporting GAAP from UK
Generally Accepted Accounting Principles (UK GAAP) to IFRS.
Therefore the combination in 2000 of Glaxo Wellcome plc and
SmithKline Beecham plc continues to be accounted for as a merger
(pooling of interests) in accordance with UK GAAP at that time. Under
US GAAP, this business combination did not qualify for pooling of
interests accounting and Glaxo Wellcome was deemed to be the
accounting acquirer in a purchase business combination.
Under IFRS, costs to be incurred in integrating and restructuring the

Wellcome, SmithKline Beecham and Block Drug businesses following
the acquisitions in 1995, 2000 and 2001 respectively were charged
to the income statement post acquisition. Similarly, integration and
restructuring costs arising in respect of the acquisitions of Corixa and
ID Biomedical in 2005 have been charged to the income statement
under IFRS. Under US GAAP, certain of these costs are considered in
the allocation of purchase consideration thereby affecting the
goodwill arising on acquisition.
Accordingly the net assets of SmithKline Beecham were recognised

at fair value as at the date of acquisition. As a result of the fair value
exercise, increases in the values of SmithKline Beechams inventory,
property, plant and equipment, intangible assets, investments and
pension obligations were recognised and fair market values
attributed to its internally-generated intangible assets, mainly product
rights (inclusive of patents and trademarks) and in-process research
and development, together with appropriate deferred taxation
effects. The difference between the cost of acquisition and the fair
value of the assets and liabilities of SmithKline Beecham is recorded
as goodwill.
IPR&D acquired in transactions other than business combinations is

discussed under Intangible assets below.
Capitalised interest
Under IFRS, the Group does not capitalise interest. US GAAP requires
interest incurred as part of the cost of constructing a fixed asset to be
capitalised and amortised over the life of the asset.
Intangible assets
Under IFRS, certain intangible assets related to specific compounds or
products which are purchased from a third party and are developed
for commercial applications are capitalised but not subject to
amortisation until regulatory approval is obtained. Under US GAAP,
payments made in respect of these compounds or products which are
still in development and have not yet received regulatory approval are
charged directly to the income statement.
Goodwill
The Group has exercised the exemption available under IFRS 1 not to
restate business combinations prior to the date of transition of the
Groups reporting GAAP from UK GAAP to IFRS. Under UK GAAP,
goodwill arising on acquisitions before 1998 accounted for under the
purchase method was eliminated against equity, and under IFRS, on
future disposal or closure of a business, any goodwill previously taken
directly to equity under a former GAAP will not be charged against
income. Under UK GAAP, goodwill arising on acquisitions from 1998
was capitalised and amortised over a period not exceeding 20 years.
On the date of the Groups transition to IFRS, 1st January 2003,
amortisation ceased in accordance with IFRS 3 Business
combinations. The Group must instead identify and value its reporting
units for the purpose of assessing, at least annually, potential
impairment of goodwill allocated to each reporting unit. As permitted
by the business combinations exemption available under IFRS 1,
amortisation arising prior to 2003 was not reversed.
Under IFRS, intangible assets are amortised over their estimated useful
economic life except in the case of certain acquired brands where the
end of the useful economic life of the brand cannot be foreseen.
Under US GAAP, until the implementation of SFAS 142 Goodwill and
Other Intangible Assets in 2002, all intangible assets, including
brands, were amortised over a finite life. On implementation of SFAS
142 in 2002, intangible assets deemed to have indefinite lives were
no longer amortised. As a result of the difference in accounting
treatment prior to the implementation of SFAS 142, the carrying
values of indefinite lived brands are affected by amortisation charged
before 2002 under US GAAP.
Under US GAAP, goodwill arising on acquisitions prior to 30th June

2001 was capitalised and amortised over a period not exceeding 40
years. In July 2001, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standard (SFAS) 142,
Goodwill and Other Intangible Assets.
135
In-process research & development (IPR&D)

Under IFRS, IPR&D projects acquired in a business combination are
capitalised and remain on the balance sheet, subject to any
impairment write-downs. Amortisation is charged over the assets
estimated useful lives from the point when the assets became available
for use. Under US GAAP, such assets are recognised in the opening
balance sheet but are then written off immediately to the income
statement, as the technological feasibility of the IPR&D has not yet
been established and it has no alternative future use. Under IFRS,
deferred tax is provided for IPR&D assets acquired in a business
combination. US GAAP does not provide for deferred tax on these
assets, resulting in a reconciling adjustment to deferred tax and
goodwill.

continued

continued
The proceeds from sale of marketable securities under US GAAP were

19,416 million in the year ended 31st December 2005. The proceeds
include the roll-over of liquid funds on short-term deposit. The gross
gains and losses reflected in the consolidated income statement in
respect of marketable securities were 7 million and nil, respectively.
Restructuring costs
Under IFRS, restructuring costs incurred following acquisitions were
charged to the profit and loss account post acquisition. For US GAAP
purposes, certain of these costs were recognised as liabilities upon
acquisition in the opening balance sheet.
Pensions and other post-retirement benefits

The key difference between IFRS and US GAAP is the method of
recognition of actuarial gains and losses. GSK has opted under IFRS
to recognise actuarial gains and losses in the statement of recognised
income and expense in the year in which they arise. Under US GAAP
actuarial gains and losses are recognised using the 10% corridor
approach and deferred actuarial gains and losses are amortised.
Therefore the pension liability recognised under IFRS is greater than
under US GAAP.
Other restructuring costs are recorded as a provision under IFRS when

a restructuring plan has been announced. Under US GAAP, a provision
may only be recognised when further criteria are met or the liability
is incurred. Therefore adjustments have been made to eliminate
provisions for restructuring costs that do not meet US GAAP
requirements.
Marketable securities
Marketable securities consist primarily of equity securities and certain
other liquid investments, principally government bonds and shortterm corporate debt instruments. Under SFAS 115 Accounting for
Certain Investments in Debt and Equity Securities, these securities
are considered available for sale and are carried at fair value, with the
unrealised gains and losses, net of tax, recorded as a separate
component of shareholders equity. Under IFRS, these are accounted
for as available-for-sale financial assets in accordance with IAS 39
Financial Instruments : Recognition and Measurement.
The accounting treatment for marketable securities under US GAAP
and IFRS is similar. However, differences do arise, principally as a result
of the category of marketable securities as defined by SFAS 115 being
smaller than the category of available-for-sale financial assets as
defined by IAS 39. Investments which are not marketable securities
under the SFAS 115 definition are accounted for at cost less
impairments under US GAAP rather than at fair value.
Stock-based compensation
Under IFRS 2 Share-based Payment, share options are fair valued at
their grant dates and the cost is charged to the income statement
over the relevant vesting periods. Under US GAAP, the Group applies
SFAS 123 Accounting for Stock-Based Compensation and related
accounting interpretations in accounting for its option plans, which
also require options to be fair valued at their grant date and included
in the income statement over the vesting period of the options.
Differences arise as a result of the application of differing
measurement bases in respect of performance conditions attaching
to share-based payments and in the treatment of lapsed grants.
Derivative instruments
SFAS 133, Accounting for Derivative Instruments and Hedging
Activities, as amended by SFAS 137 and SFAS 138 and as interpreted
by the Derivatives Implementation Group, was adopted by the Group
with effect from 1st January 2001. SFAS 133 establishes accounting
and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively,
referred to as derivatives) and for hedging activities. SFAS 133 requires
that an entity recognise all derivatives as either assets or liabilities in
the consolidated balance sheet and measure those instruments at fair
value. Changes in fair value over the period are recorded in current
earnings unless hedge accounting is obtained. SFAS 133 prescribes
requirements for designation and documentation of hedging
relationships and ongoing assessments of effectiveness in order to
qualify for hedge accounting.
The Group did not adopt IAS 39 until 1st January 2005, and, in
accordance with the exemption available under IFRS 1, has presented
financial instruments in the comparative periods in accordance with
UK GAAP. Therefore in 2004 these securities are stated at the lower
of cost and net realisable value.
Marketable securities are reviewed at least every six months for other
than temporary impairment. For equity securities, the factors
considered include:
the investees current financial performance and future prospects
the general market condition of the geographic or industry area in
which the investee operates
the duration and extent to which the market value has been below
cost.
The Group also evaluates contracts for embedded derivatives. In

accordance with SFAS 133 requirements, if embedded derivatives are
not clearly and closely related to the host contract, they are accounted
for separately from the host contract as derivatives.
Gross unrealised gains and losses on marketable securities were 36

million and 4 million, respectively, at 31st December 2005 (2004
60 million and 3 million, respectively). The fair value of marketable
securities with unrealised losses at 31st December 2005 is 62 million
(2004 21 million). All of these marketable securities have been in
a continuous loss position for less than 12 months. Deferred tax
provided against unrealised gains and losses at 31st December 2005
was 4 million (2004 16 million). Gains of 7 million were
reclassified out of accumulated other comprehensive income into the
income statement on disposals of equity investments during the year.
The key differences between IFRS under which the Groups financial
statements are prepared and US GAAP, and in the Groups application
of their respective requirements, are:
certain derivatives which are designated by the Group as hedging
instruments under IAS 39 are not designated as hedging
instruments under SFAS 133. Accordingly, hedge accounting is not
applied under US GAAP in respect of these arrangements
136

continued

continued
Other
The following adjustments are also included in the reconciliations:
the definition of derivatives within the scope of SFAS 133 excludes

instruments for which there is no liquid market. This leads to certain
items not being recognised on the balance sheet, although they are
accounted for as derivatives under IFRS, most notably the call option
over Theravance shares
computer software under IFRS, the Group capitalises costs incurred

in acquiring and developing computer software for internal use
where the software supports a significant business system and the
expenditure leads to the creation of a durable asset. For US GAAP,
the Group applies SOP 98-1, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use, which restricts
the categories of costs which can be capitalised.
IAS 39 has an exemption from the requirement to recognise

embedded foreign currency derivatives where the currency is
commonly used in the economic environment of the host contract.
SFAS 133 does not grant a similar exemption and so the Group
identifies and separately accounts for more embedded derivatives
under US GAAP than it does under IFRS.
guarantor obligations under US GAAP, the Group applies the

FASBs Financial Interpretation No. 45 (FIN 45), Guarantors
Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others. This requires that
the Group recognise certain guarantees issued, measured at fair
value. Under IFRS, such guarantor obligations are recognised when
further additional criteria are met or the liability is incurred.
The Group has exercised the exemption available under IFRS 1 to

present financial instruments in the comparative periods in accordance
with UK GAAP. Under UK GAAP, some derivative instruments used for
hedges were not recognised on the balance sheet and the matching
principle was used to match the gain or loss under these hedging
contracts to the foreign currency transaction or profits to which they
related. Gains and losses related to the fair value adjustments on these
derivative instruments are therefore reconciling items. As in 2005, the
Group did not designate any of its derivatives as qualifying hedge
instruments under SFAS 133.
The fair value and book value of derivative instruments as at 31st
December 2004 is disclosed in the Classification and fair value of
financial assets and liabilities table in Note 36.
Valuation of derivative instruments

The fair value of derivative instruments is sensitive to movements in
the underlying market rates and variables. The Group monitors the
fair value of derivative instruments on at least a quarterly basis.
Derivatives, including interest rate swaps and cross-currency swaps,
are valued using standard valuation models, counterparty valuations,
or third party valuations. Standard valuation models used by the
Group consider relevant discount rates, the market yield curve on the
valuation date, forward currency exchange rates and counterparty
risk. All significant rates and variables are obtained from market
sources. All valuations are based on the remaining term to maturity
of the instrument.
fixed asset and inventory impairments reversals of impairments

previously recorded against the carrying value of assets are permitted
under IFRS in certain circumstances. US GAAP does not permit
reversals of these impairments.
various other small adjustments.
Consolidated summary statement of cash flows

The US GAAP cash flow statement reports three categories of cash
flows: operating activities (including tax and interest); investing
activities (including capital expenditure, acquisitions and disposals
together with cash flows from available-for-sale current asset
investments); and financing activities (including dividends paid). A
summary statement of cash flows is presented on page 140.
Foreign exchange contracts are valued using forward rates observed

from quoted prices in the relevant markets when possible. The Group
assumes parties to long-term contracts are economically viable but
reserves the right to exercise early termination rights if economically
beneficial when such rights exist in the contract.
Comprehensive income statement

The requirement of SFAS 130, Reporting comprehensive income, to
provide a comprehensive income statement is met under IFRS by the
Statement of recognised income and expense (page 88).
Dividends
Under IFRS, GSK plcs quarterly dividends are recognised only on
payment. Under US GAAP, the dividends are recognised in the
financial statements when they are declared.
137
variable interest entities under the FASBs Interpretation No. 46

Revised (FIN 46R), Consolidation of Variable Interest Entities, certain
entities, known as Variable Interest Entities (VIEs), must be
consolidated by the primary beneficiary of the entity. The primary
beneficiary is generally defined as having the majority of the risks
and rewards arising from the VIE. Additionally, for VIEs in which a
significant, but not majority, variable interest is held, certain
disclosures are required. The Group has completed a review of
potential VIEs and, as a consequence, has consolidated Theravance
Inc. from May 2004 (see Note (c) on page 142). No other VIEs of
which the Group is the primary beneficiary were identified.

continued

continued
Other recent FASB pronouncements

In November 2004, the FASB issued SFAS 151, Inventory Costs an
amendment of ARB No. 43, Chapter 4. SFAS 151 clarifies that
abnormal amounts of idle facility expense, freight, handling costs,
and wasted materials (spoilage) should be recognised as currentperiod charges and requires the allocation of fixed production
overheads to inventory based on the normal capacity of the
production facilities. SFAS 151 is effective for fiscal years beginning
after 15th June 2005.
Recent Financial Accounting Standards Board (FASB)

pronouncements
FSP FIN 46(R)-5
In March 2005, the FASB issued FASB Staff Position (FSP) FIN 46 (R)5, Implicit Variable Interests under FASB Interpretation No. 46 (R),
Consolidation of Variable Interest Entities. The FSP requires a reporting
enterprise to consider whether it holds an implicit variable interest in
the VIE or potential VIE. The determination of whether an implicit
variable interest exists involves determining whether an enterprise
may be indirectly absorbing or receiving the variability of the entity.
The FSP is effective in the first reporting period beginning after 3rd
March 2005. The adoption of the FSP by the Group has not had an
impact on its overall results of operations or financial position under
US GAAP.
In December 2004, the FASB issued SFAS 153, Exchanges of Nonmonetary Assets - an amendment of APB Opinion 29, which amends
APB Opinion 29, Accounting for Non-monetary Transactions to
eliminate the exception for non-monetary exchanges of similar
productive assets and replaces it with a general exception for
exchanges of non-monetary assets that do not have commercial
substance. SFAS 153 is effective for non-monetary asset exchanges
occurring in fiscal years beginning after 15th June 2005.
EITF 05-06
In June 2005 the Emerging Issues Task Force (EITF) reached consensus
on Issue 05-6, Determining the Amortisation Period for Leasehold
Improvements Purchased after Lease Inception or Acquired in a
Business Combination. EITF 05-6 requires leasehold improvements
acquired in a business combination to be amortised over the shorter
of the useful life of the assets or a term that includes required lease
periods and renewals deemed to be reasonably assured at the date
of acquisition. Additionally, the Issue requires improvements placed in
service significantly after and not contemplated at or near the
beginning of the lease term to be amortised over the shorter of the
useful life of the assets or a term that includes required lease periods
and renewals deemed to be reasonably assured at the date the
leasehold improvements are purchased.
In March 2005, the FASB published FASB Staff Position (FSP) FIN 47,
Accounting for Conditional Asset Retirement Obligations an
interpretation of FASB Statement No. 143 which clarifies the
application of SFAS 143 Accounting for Obligations Associated with
the Retirement of Long-Lived Assets in respect of conditional asset
retirement obligations. The FSP is effective in the first period beginning
after 15th December 2005.
In November 2005, the FASB issued FSP 115-1 and FSP 124-1, The
Meaning of Other-Than-Temporary Impairment and Its Application
to Certain Investments which nullify certain requirements of EITF 031 and supersede EITF D-44. The FSPs provide guidance for identifying
impaired investments and new disclosure requirements for
investments that are deemed to be temporarily impaired. The FSPs are
effective for fiscal years beginning after 15th December 2005.
EITF 05-6 is effective immediately. The adoption of EITF 05-6 has not
had a material impact on the Groups consolidated financial position,
results of operations or cash flows under US GAAP.
In November 2005, the FASB issued FSP FIN 45-3 to provide

clarification with respect to the application of FIN 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others. FSP FIN 45-3 includes
within its scope and provides guidance concerning the application of
FIN 45 to a guarantee granted to a business (or to its owners) that the
entitys revenue (or the revenue of a specified portion of the entity)
will meet a minimum amount (referred to as a minimum revenue
guarantee).
SFAS 123R and related FSPs

In December 2004, the FASB issued SFAS 123 (revised 2004), ShareBased Payment. SFAS 123R replaces SFAS 123 and supersedes APB
25. SFAS 123R requires that the cost resulting from all share-based
payment transactions be recognised in the financial statements at fair
value and that excess tax benefits be reported as a financing cash
inflow rather than as a reduction of taxes paid. SFAS 123R is effective
for the Group from 1st January 2006. From the effective date,
compensation cost is recognised based on the requirements of SFAS
123R for all new share-based awards and based on the requirements
of SFAS 123 for all awards granted prior to the effective date of SFAS
123R that remain unvested on the effective date.
The Group does not expect the adoption of the above

pronouncements to have a material impact on its consolidated
financial position, results of operations or cash flows under US GAAP.
In May 2005, SFAS 154, Accounting Changes and Error Corrections
replacement of APB Opinion 20 and SFAS 3, was issued. SFAS 154
changes the accounting for and reporting of a change in accounting
principle by requiring retrospective application to prior periods
financial statements of changes in accounting principle unless
impracticable. SFAS 154 is effective for accounting changes made in
fiscal years beginning after 15th December 2005. The Group cannot
determine the impact of SFAS 154 as it depends in part upon future
changes to US accounting principles.
During 2005 the FASB issued FSP 123R-1, FSP 123R-2 and FSP 123R3. These FSPs detail with various aspects of the implementation of
SFAS 123R. GSK is in the process of assessing the impact of the
adoption of SFAS 123R on the Groups consolidated financial position,
results of operations and cash flows under US GAAP.
138

continued
38 Reconciliation to US accounting principles continued

The following is a summary of the material adjustments to profit and shareholders funds which would be required if US GAAP had been applied
instead of IFRS.
Notes
2005
m
2004
m
2003
m
Profit after taxation for the year under IFRS

4,816
(127)
4,022
(114)
4,308
(107)
Profit attributable to shareholders under IFRS

US GAAP adjustments:
Amortisation and impairment of intangible assets
Acquisition and disposal of product rights
Write-off of in-process R&D acquired in business combinations
Disposal of interests in associates and subsidiaries
Investments
Pensions and post-retirement benefits
Stock-based compensation
Derivative instruments and hedging
Fair value of put option granted to minority shareholders
Restructuring
Tax benefits on exercise of stock options
Deferred taxation
Other
4,689
3,908
4,201
(1,584)
(72)
(26)
(1)
(2)
(127)
6
(30)
1
(47)
585
(56)
(1,441)
(210)
(17)
(97)
(30)
(126)
13
33
17
(12)
(10)
757
(53)
(2,303)
(105)
23
(31)
(130)
(2)
(41)
98
(13)
740
(17)
3,336
2,732
2,420
2005
p
2004
p
2003
p
Basic net income per share
58.8
47.6
41.7
Diluted net income per share
58.3
47.5
41.6
2005
$
2004
$
2003
$
Basic net income per ADS
2.14
1.74
1.37
Diluted net income per ADS
2.12
1.74
1.36
2005
m
2004
m
b
b
b
c
d
d
Net income under US GAAP
Earnings per share under US GAAP
Earnings per ADS under US GAAP
Equity shareholders funds
Notes
Total equity under IFRS

Minority interests
7,570
(259)
5,937
(213)
Shareholders equity under IFRS

US GAAP adjustments:
Goodwill
Product rights
Pension intangible asset
Marketable securities
Other investments
Restructuring costs
Derivative instruments and hedging
Fair value of put option granted to minority shareholders
Dividends
Deferred taxation
Other
7,311
5,724
17,976
12,065
86
33
179
576
1,163
65
(33)
(568)
(4,531)
(40)
17,817
13,756
102
43
180
49
532
1,128
80
(15)
17
(571)
(4,840)
40
34,282
34,042
a
b
f
c
e
Shareholders equity under US GAAP
139
Profit

continued

2005
m
Consolidated statement of cash flows under US GAAP

Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
2004
m
2003
m
5,751
(1,843)
(2,409)
4,618
(988)
(3,038)
4,895
(904)
(3,051)
Net increase in cash and cash equivalents

Exchange rate movements
Cash and cash equivalents at beginning of year
1,499
237
2,485
592
(93)
1,986
940
(36)
1,082
Cash and cash equivalents at end of year
4,221
2,485
1,986
Notes to the Profit and Equity shareholders funds reconciliations

(a) Goodwill
The following tables set out the IFRS to US GAAP adjustments required to the IFRS balance sheet in respect of goodwill including goodwill in
respect of associated undertakings:
2005
m
2004
m
Goodwill under IFRS

Goodwill under US GAAP
696
18,672
304
18,121
IFRS to US GAAP adjustments
17,976
17,817
Balance sheet
Of the 18,672 million (2004 18,121 million) US GAAP goodwill balance at 31st December 2005, 15,875 million (2004 15,875 million)
is in respect of the goodwill arising on the acquisition of SmithKline Beecham by Glaxo Wellcome in 2000.
The following tables present the changes in goodwill allocated to the Groups reportable segments:
Pharmaceuticals
m
Consumer
Healthcare
m
Total
m
At 1st January 2004

Asset written off
15,668
(1)
5
2,461
(12)
18,129
(1)
(7)

Additions
Disposals
15,672
528
(1)
5
2,449
19
18,121
528
(1)
24
16,204
2,468
18,672
(b) Intangible assets

The following tables set out the IFRS to US GAAP adjustments required to the IFRS income statement and balance sheet in respect of
intangible assets:
2005
m
2004
m
2003
m
Amortisation charge under IFRS

Amortisation charge under US GAAP
109
1,674
75
1,516
58
1,641
IFRS to US GAAP adjustment for amortisation
1,565
1,441
1,583
99
118
26
26
46
766
19
720
Income statement
Impairment charge under IFRS

Impairment charge under US GAAP
IFRS to US GAAP adjustment for impairment
In addition to the above adjustments for amortisation and impairments, further IFRS to US GAAP adjustments arose during the year of 98
million (2004 173 million; 2003 105 million) in respect of the acquisition and disposal of in-process R&D, licences, patents etc. which
are capitalised under IFRS but charged directly to research and development expense under US GAAP, and nil million (2004 37 million;
2003 nil) in respect of disposals of product rights which have a higher carrying value under US GAAP than under IFRS.
140

continued

2005
m
2004
m
Product rights intangible assets under IFRS

Product rights intangible assets under US GAAP
3,120
15,185
2,241
15,997
Net IFRS to US GAAP product rights adjustments
12,065
13,756
Indefinite
lived brands
m
Total
m
4,722
27,187
Balance sheet
Product rights intangible assets under US GAAP are analysed as follows:

Acquired
products
m
2005
Cost
Accumulated amortisation
and impairment
20,857
Licenses, Brands subject

patents, etc. to amortisation
m
m
512
1,096
(11,115)
(72)
(185)
(630)
(12,002)
9,742
440
911
4,092
15,185
Cost
Accumulated amortisation
and impairment
20,061
398
1,096
4,652
26,207
(9,472)
(27)
(134)
(577)
(10,210)
Carrying value
10,589
371
962
4,075
15,997
Carrying value
2004
2005
m
2004
m
Avandia
Seroxat/Paxil
Augmentin
Fluviral
Havrix
Infanrix
Coreg
Twinrix
Engerix-B
Hycamtin
Others
3,841
1,410
1,142
683
363
294
240
235
224
212
827
4,190
1,879
1,318
387
314
320
250
239
248
1,444
Acquired products intangible assets under US GAAP
9,471
10,589
The indefinite lived brands relate to a large number of Consumer Healthcare products, principally arising from the acquisitions of SmithKline
Beecham plc (including products previously acquired by SmithKline Beecham from Sterling Winthrop Inc.) and the Block Drug Company,
with book values as follows:
Panadol
Aquafresh
Lucozade
Horlicks
Ribena
Nicorette
Odol
Tums
Sensodyne
Nicoderm
Others
Indefinite lived brands intangible assets under US GAAP
141
2005
m
2004
m
730
347
324
319
309
292
228
226
225
224
868
692
347
324
319
309
292
228
226
221
224
893
4,092
4,075
The acquired products are pharmaceutical products, principally arising from the acquisition of SmithKline Beecham plc, with book values net
of accumulated amortisation and impairment as follows:

continued

Each of these brands is considered to have an indefinite life, given the strength and durability of the brand and the level of marketing support.
The brands are in relatively stable and profitable market sectors, and their size, diversification and market shares mean that the risk of marketrelated factors causing a shortening of the brands lives is considered to be relatively low. The Group is not aware of any material legal,
regulatory, contractual, competitive, economic or other factor which could limit their useful lives. Accordingly, they are not amortised. Each
brand is tested annually for impairment applying a fair value less costs to sell methodology and using five year post-tax cash flow forecasts
with a terminal value calculation and applying a discount rate of the Group post-tax weighted average cost of capital of 8%. This approximates
to applying a pre-tax discount rate to pre-tax cash flows.
The carrying values of certain intangibles subject to amortisation were reviewed and an impairment of 68 million (2004 26 million) has
been recorded. Of this, 46 million (2004 nil) relates to pharmaceutical products and 22 million (2004 26 million) to Consumer
Healthcare products. An impairment charge in respect of Consumer Healthcare intangible assets not subject to amortisation of 50 million
was recognised during 2005 (2004 nil).
As discussed in Note 41 Legal proceedings, a number of distributors of generic drugs have filed applications to market generic versions of a
number of the Groups products prior to the expiration of the Groups patents. If generic versions of products are launched in future periods
at earlier dates than the Group currently expects, impairments of the carrying value of the products may arise.
The estimated future amortisation expense for the next five years for intangible assets subject to amortisation as of 31st December 2005
is as follows:
Year
2006
2007
2008
2009
2010
1,447
1,430
1,430
774
756
Total
5,837
In-process R&D of 26 million (2004 nil; 2003 nil) arising on the acquisitions of ID Biomedical and Corixa Corporation has been writtenoff. This has been valued on the same basis as the other intangible assets acquired and relates to various development projects in the preapproval stage where the technological feasibility of the projects had not been established at the point of acquisition.
(c) Theravance
In May 2004, the Group formed a strategic alliance with Theravance Inc. to develop and commercialise novel medicines across a variety of
important therapeutic areas. Under the terms of the alliance, Theravance received $129 million, a significant part of which related to the
Groups purchase of Theravance shares. The Group has a call option in 2007 to further increase its ownership to over 50% at a significant
premium to the price paid in the 2004 transaction. Theravances shareholders have a put option at a lower exercise price to cause GlaxoSmithKline
to acquire up to half of their outstanding stock in 2007. Given the maximum number of shares subject to the put option, the Groups obligation
is capped at $525 million. The Group has an exclusive option to license potential new medicines from all of Theravances programmes until
August 2007. Upon exercising its option over a Theravance programme, the Group will be responsible for the relevant development,
manufacturing and commercialisation activities. Depending on the success of such programmes, Theravance will receive clinical, regulatory
and commercial milestone payments and royalties on the subsequent sales of medicines. Based on the assessment performed, the Group was
the primary beneficiary of Theravance, as defined by FIN 46R, and as a result Theravance has been consolidated into the Groups US GAAP
financial statements from May 2004. The net assets acquired were measured at fair value. The principal adjustment to the carrying value of
the net assets in Theravances balance sheet prior to the acquisition was recognition of in-process research and development (IPR&D) at a valuation
of 273 million. The IPR&D was written off immediately after the acquisition in accordance with US GAAP purchase accounting. The effect of
consolidating Theravance, including reversal of fair value gains recorded for the investment under IFRS, has been to decrease shareholders
equity by 10 million (2004 60 million) and net income by 16 million (2004 60 million).
Additionally, the Group has accounted for the Theravance put option discussed above in accordance with SFAS 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity, which requires the Group to record the fair value of the put option as
a liability. The fair value of the Theravance put option at 31st December 2005 is 47 million (2004 69 million). In accordance with SFAS 133
Accounting for Derivative Instruments and Hedging Activities the call option is not recognised in the financial statements as it is not readily
convertible into cash.
142

continued

(d) Taxation
2005
m
Total tax expense
2004
m
2003
m
IFRS:
Current tax expense
Deferred tax (credit)/expense
2,019
(103)
1,667
90
1,961
(310)
Total tax expense
1,916
1,757
1,651
US GAAP:
Current tax expense
Deferred tax credit
2,103
(688)
1,717
(667)
2,014
(1,050)
Total tax expense
1,415
1,050
964
IFRS to US GAAP adjustments:

Current tax expense
Deferred tax credit
84
(585)
50
(757)
53
(740)
Total tax expense
(501)
(707)
(687)
The IFRS to US GAAP adjustment in respect of current tax expense includes 37 million (2004 40 million; 2003 40 million) for the Groups
share of the tax expense of associates. This is recognised in the Taxation charge in the income statement under US GAAP but recorded in Share
of after tax profits of associates in the income statement presented in accordance with IFRS.
(e) Deferred taxation under US GAAP
Classification of GSKs deferred taxation liabilities and assets under US GAAP is as follows:
Liabilities
Stock valuation adjustment
Other timing differences
(42)
63
Current deferred taxation liabilities
21
2004
m
(52)
70
18
Accelerated capital allowances

Product rights
Product and business disposals
(187)
(4,035)
13
25
25
(621)
(4,264)
(32)
294
37
Total deferred taxation liabilities
(4,138)
(4,568)
619
(72)
614
594
(62)
523
Assets
Intra-Group profit
Stock valuation adjustment
Current deferred taxation assets
1,161

Product and business disposals
Tax losses
Restructuring
Share option and award schemes
Valuation allowances
(492)
(9)
43
125
53
160
276
(3)
(62)
Total deferred taxation assets
1,055
(54)
(253)
61
51
149
179
45
(42)
1,252
1,191
Net deferred taxation under US GAAP

Net deferred taxation under IFRS
(2,886)
1,645
(3,377)
1,463
IFRS to US GAAP adjustment
(4,531)
(4,840)
143
2005
m

continued

(f) Pensions and post-retirement costs under US GAAP
2005
m
2004
m
2003
m
UK pension schemes
US pension schemes
Other overseas pension schemes
Post-employment costs
218
55
87
114
2
225
54
77
96
18
278
79
83
118
24
476
470
582
306
29
25
114
2
298
37
21
96
18
389
26
25
118
24
476
470
582
Analysed as:
Funded defined benefit/hybrid schemes
Unfunded defined benefit schemes
Defined contribution schemes
Post-employment costs
The disclosures below include the additional information required by SFAS 132R. The pension costs of the UK, US and major overseas defined
benefit pension plans have been restated in the following tables in accordance with US GAAP. Minor retirement plans with pension costs in
2005 of 8 million (2004 5 million; 2003 9 million), have not been recalculated in accordance with the requirements of SFAS 87, and
have been excluded.
2005
m
2004
m
2003
m
223
408
(444)
13
2
107
213
400
(431)
14
2
115
211
392
(408)
17
3
79
Net periodic pension cost under US GAAP
309
313
294
Termination benefits and curtailment costs
19
13
112
Major assumptions used in computing pension costs
2005
% pa
2004
% pa
2003
% pa
Rates of future pay increases

Discount rate
Expected long-term rates of return on plan assets
4.00
4.75
6.75
4.25
5.25
7.00
4.25
5.50
7.50
Net periodic pension cost for the major retirement plans
Service cost
Interest cost
Expected return on plan assets
Amortisation of prior service cost
Amortisation of transition obligation
Amortisation of net actuarial loss
In aggregate, average international plan assumptions did not vary significantly from US assumptions.
Estimated future benefit payments
2006
2007
2008
2009
2010
20112015
339
353
365
381
400
2,272
144

continued

2005
m
Change in benefit obligation
2004
m
Benefit obligation at 1st January

Amendments
Service cost
Interest cost
Plan participants contributions
Actuarial loss
Benefits paid
Termination benefits and curtailment costs
(8,171)
(1)
(223)
(408)
(15)
(1,334)
372
(15)
(202)
(7,866)
(2)
(213)
(400)
(15)
(137)
345
(5)
122
Benefit obligation at 31st December
(9,997)
(8,171)
Benefit obligation at 31st December for pension plans with accumulated benefit
obligations in excess of plan assets
(8,748)
(5,554)
The accumulated benefit obligation at 31st December 2005 was 9,294 million (31st December 2004 7,691 million).
2004
m
Fair value of plan assets at 1st January

Benefits paid
6,690
1,113
661
15
(372)
191
5,968
651
465
15
(345)
(64)
Fair value of plan assets at 31st December
8,298
6,690
Fair value of plan assets at end of year for pension plans with accumulated benefit
obligations in excess of plan assets
7,735
4,519
Plan assets consist primarily of investments in UK and overseas equities, fixed interest securities, index-linked securities and property. At 31st
December 2005 UK equities included 1.9 million GSK shares (2004 0.3 million shares) with a market value of 28 million (2004 4 million).
An analysis of the percentage of total plan assets for each major category is disclosed in Note 26. This analysis includes assets valued at 101
million in minor retirement plans, which have been excluded from these tables.
2005
m
Funded status
Funded status
Unrecognised net actuarial loss
Unrecognised prior service cost
Unrecognised transition obligation
(1,699)
2,499
60
21
2004
m
(1,481)
1,900
75
24
Net amount recognised
881
518
Amounts recognised in the statement of financial position
2005
m
2004
m
Prepaid benefit cost

Accrued pension liability
Intangible asset
Accumulated other comprehensive income
8
(1,027)
86
1,814
Net amount recognised
881
145
365
(1,065)
102
1,116
518
2005
m
Change in plan assets

continued

Post-retirement healthcare under US GAAP
The post-retirement healthcare costs of the UK, US and major overseas post-retirement healthcare schemes have been restated in the following
tables in accordance with US GAAP. Minor healthcare plans with costs in 2005 of 5 million (2004 nil; 2003 13 million) have not been
recalculated and have been excluded.
2005
m
Net healthcare cost

Service cost
Interest cost
Amortisation of prior service cost
Amortisation of net actuarial loss
37
57
(2)
15
2004
m
2003
m
32
55
(1)
11
29
64
(2)
14
Net healthcare cost
107
97
105
The major assumptions used in calculating the net healthcare cost were:
%pa
%pa
%pa
Rate of future healthcare inflation

Discount rate
10.0 to 5.0
5.50
9.0 to 5.0 10.0 to 5.0

5.75
6.25
The rate of future healthcare inflation reflects the fact that the benefits of certain groups of participants are capped.
Change in benefit obligation
2005
m
2004
m
Benefit obligation at 1st January

Service cost
Interest cost
Actuarial loss
Benefits paid
Exchange
965
37
57
8
82
(43)
105
975
32
55
8
6
(47)
(64)
Benefit obligation at 31st December
1,211
965
Change in plan assets

Fair value of plan assets at 1st January
Employer and plan participants contributions
Benefits paid
43
(43)
Fair value of plan assets at 31st December
47
(47)
Funded status
Funded status
Unrecognised net actuarial loss
Unrecognised prior service cost
Accrued post-retirement healthcare cost
Impact of a 1% variation in the rate of future healthcare inflation
Effect on total service and interest cost for post-retirement healthcare
Effect on obligation for post-retirement healthcare
(1,211)
450
(14)
(965)
340
(14)
(775)
(639)
1% decrease
m
(7)
(81)
Estimated future benefit payments
Gross
m
2006
2007
2008
2009
2010
20112015
42
46
49
53
56
317
146
1% increase
m
10
90
Medicare
subsidy
m
(3)
(3)
(4)
(4)
(4)
(29)
Net
m
39
43
45
49
52
288

continued
39 Principal Group companies

The following represent the principal subsidiary and associated undertakings of the GlaxoSmithKline Group at 31st December 2005. Details
are given of the principal country of operation, the location of the headquarters, the business segment and the business activities. The equity
share capital of these undertakings is wholly owned by the Group except where its percentage interest is shown otherwise. All companies are
incorporated in their principal country of operation except where stated.
Location
England
Brentford
Brentford
Brentford
Brentford
Brentford
Brentford
Greenford
Greenford
Brentford
Brentford
Stockley Park
Brentford
Brentford
Brentford
Brentford
Brentford
Brentford
Brentford
Greenford
Subsidiary undertaking
+GlaxoSmithKline Holdings (One) Limited

+GlaxoSmithKline Services Unlimited
+GlaxoSmithKline Finance plc
GlaxoSmithKline Capital plc
SmithKline Beecham p.l.c.
Wellcome Limited
Glaxo Group Limited
Glaxo Operations UK Limited
Glaxo Wellcome International B.V. (i)
Glaxo Wellcome Investments B.V. (i)
Glaxo Wellcome UK Limited
GlaxoSmithKline Export Limited
GlaxoSmithKline Research & Development Limited
GlaxoSmithKline UK Limited
SmithKline Beecham (Investments) Limited
SmithKline Beecham (SWG) Limited
SmithKline Beecham Research Limited
Stafford-Miller Limited
The Wellcome Foundation Limited
Segment
Activity
Ph,CH
Ph,CH
Ph,CH
h
s
f
Ph
Ph,CH
Ph,CH
Ph
Ph
Ph,CH
Ph,CH
Ph
Ph
Ph
Ph
Ph,CH
CH
Ph
CH
Ph
f
dehmpr
h
h
p
h
h
hmp
e
dr
mp
f
em
m
mp
p
Austria
Vienna
GlaxoSmithKline Pharma G.m.b.H
Ph
Belgium
Genval
Rixensart
Rixensart
GlaxoSmithKline S.A.
GlaxoSmithKline Biologicals S.A.
GlaxoSmithKline Biologicals Manufacturing S.A.
Ph
Ph
Ph
m
dempr
h
Guernsey
St. Peter Port
SmithKline Beecham Limited
Ph,CH
Denmark
Ballerup
Brndby
GlaxoSmithKline Consumer Healthcare A/S

GlaxoSmithKline Pharma A/S
CH
Ph
m
m
Finland
Espoo
GlaxoSmithKline Oy
Ph
France
Marly le Roi
Marly le Roi
Marly le Roi
Marly le Roi
Groupe GlaxoSmithKline S.A.S.

Laboratoire GlaxoSmithKline S.A.S.
Glaxo Wellcome Production S.A.S.
GlaxoSmithKline Sante Grand Public S.A.S.
Ph
Ph
Ph
CH
h
m
mp
m
Germany
Buehl
Munich
GlaxoSmithKline Consumer Healthcare GmbH & Co. KG

GlaxoSmithKline Pharma GmbH
CH
Ph
dhmprs
h
Greece
Athens
GlaxoSmithKline A.E.B.E
Ph,CH
hm
Hungary
Budapest
GlaxoSmithKline Medicine and Healthcare Products Limited
Ph,CH
em
Italy
Verona
Milan
GlaxoSmithKline S.p.A.
GlaxoSmithKline Consumer Healthcare S.p A.
Ph
CH
dhmr
hm
Luxembourg
Mamer
GlaxoSmithKline International (Luxembourg) S.A.
Ph,CH
fh
147
Europe

continued
39 Principal Group companies continued

Europe
Location
Netherlands
Zeist
Zeist
Norway
Segment
Activity
GlaxoSmithKline B.V.
GlaxoSmithKline Consumer Healthcare B.V.
Ph
CH
m
m
Oslo
GlaxoSmithKline AS
Ph
Poland
Poznan
Warsaw
GlaxoSmithKline Pharmaceuticals S.A.

GlaxoSmithKline Consumer Healthcare Sp.Zo.o.
Ph
CH
mp
me
Portugal
Lisbon
GlaxoSmithKline-Produtos Farmaceuticos, Limitada
Ph
Republic of
Ireland
Dublin
Carrigaline
Carrigaline
GlaxoSmithKline Consumer Healthcare (Ireland) Limited (ii)

SmithKline Beecham (Cork) Limited (ii)
SmithKline Beecham (Manufacturing) Limited (ii)
CH
Ph
Ph
m
p
p
Spain
Tres Cantos
Alcala de Henares
GlaxoSmithKline S.A.
SmithKline Beecham S.A.
Ph
Ph
mp
p
Sweden
Solna
GlaxoSmithKline AB
Ph
Switzerland
Muenchenbuchsee
Muenchenbuchsee
Zug
GlaxoSmithKline Investments (Switzerland) GmbH

GlaxoSmithKline AG
Adechsa GmbH
Ph,CH
Ph
Ph
h
m
e
Philadelphia
Pittsburgh
Pittsburgh
Wilmington
Wilmington
SmithKline Beecham Corporation

GlaxoSmithKline Consumer Healthcare, L.P.
Block Drug Company, Inc.
GlaxoSmithKline Financial Inc.
GlaxoSmithKline Holdings (Americas) Inc.
Ph,CH d e h m p r s
CH
mp
CH
hmp
Ph
f
Ph,CH
h
Bermuda
Hamilton
GlaxoSmithKline Insurance Ltd
Ph,CH
Canada
Mississauga
Vancouver
GlaxoSmithKline Inc.
ID Biomedical Corporation
Ph,CH
Ph
mpr
dmpr
Australia
Boronia
Glaxo Wellcome Australia Pty Ltd
Ph,CH
dempr
China
Hong Kong
Tianjin
GlaxoSmithKline Limited
Sino-American Tianjin Smith Kline & French Laboratories Ltd
Ph,CH
Ph
m
dmpr
55
India
Mumbai
Nabha
GlaxoSmithKline Pharmaceuticals Limited

GlaxoSmithKline Consumer Healthcare Limited (iii)
Ph
CH
mp
mp
51
43
Malaysia
Petaling Jaya
GlaxoSmithKline Pharmaceutical Sdn Bhd
Ph
97
USA
USA
88
Americas
Asia Pacific
New Zealand Auckland
GlaxoSmithKline NZ Limited
Ph,CH
Pakistan
Karachi
GlaxoSmithKline Pakistan Limited
Ph,CH
mpe
Philippines
Makati
GlaxoSmithKline Philippines Inc
Ph,CH
Singapore
Singapore
Singapore
Glaxo Wellcome Manufacturing Pte Ltd

GlaxoSmithKline Pte Ltd
Ph
Ph
p
m
South Korea
Seoul
GlaxoSmithKline Korea
Ph
mp
Taiwan
Taipei
Glaxo Wellcome Taiwan Limited
Ph
mp
148
79

continued
39 Principal Group companies continued

Japan
Location
Segment
Activity
Japan
Tokyo
GlaxoSmithKline K.K.
Ph,CH
dmpr
85
Argentina
Buenos Aires
GlaxoSmithKline Argentina S.A.
Ph,CH
mp
Brazil
Rio de Janeiro
GlaxoSmithKline Brasil Ltda
Ph,CH
mp
Colombia
Bogota
GlaxoSmithKline Colombia S.A.
Ph,CH
Mexico
Delegacion Tlalpan
GlaxoSmithKline Mexico S.A. de C.V.
Ph,CH
emps
Puerto Rico
Guaynabo
San Juan
GlaxoSmithKline Puerto Rico Inc.

SB Pharmco Puerto Rico Inc.
Ph
Ph
m
p
Venezuela
Caracas
GlaxoSmithKline Venezuela C.A.
Ph,CH
Cairo
GlaxoSmithKline S.A.E
Ph
mp
Latin America
Middle East &

Africa
South Africa
Bryanston
GlaxoSmithKline South Africa (Pty) Ltd
Turkey
Istanbul
GlaxoSmithKline Ilaclari Sanayi ve Ticaret A.S.
USA
Location
Associated undertaking
USA
Teterboro
Quest Diagnostics Incorporated (iv)
i)
Ph,CH
mp
Ph
mp
90
Business
Clinical testing
18
Incorporated in the Netherlands.
ii) Exempt from the provisions of Section 7 of the Companies (Amendment) Act 1986 (Ireland).
iii) Consolidated as a subsidiary undertaking in accordance with Section 258 (4)(a) of the Companies Act on the grounds of dominant
influence.
iv) Equity accounted on the grounds of significant influence.
+
Directly held wholly owned subsidiary of GlaxoSmithKline plc.
Key
Business segment: Ph Pharmaceuticals, CH Consumer Healthcare
Business activity:
d development, e exporting, f finance, h holding company, i insurance, m marketing, p production, r research, s service
Full details of all Group subsidiary and associated undertakings will be attached to the companys Annual Return to be filed with the Registrar
of Companies.
149
Egypt

continued
40 Transition to IFRS
IFRS adjustments
A summary of the principal differences between UK GAAP and IFRS
as they apply to GSK is set out below and the financial effect is shown
on pages 153 to 156.
Background
The IFRS project
In June 2002, the Council of the European Union adopted a
Regulation requiring listed companies in its Member States to prepare
their consolidated financial statements in accordance with
International Financial Reporting Standards (IFRS) from 2005.
Customer allowances
This adjustment is a reclassification between turnover and expenses
with no profit or cash flow effect. IFRS has no detailed rules in relation
to when certain marketing and promotional expenditure should be
deducted from turnover rather than recorded as an expense. However,
these rules do exist under US GAAP in EITF 01-09, Accounting for
Consideration Given by a Vendor to a Customer, which requires most
marketing, advertising, and promotion payments made to customers
to be deducted from turnover. This has the most significant impact in
the Consumer Healthcare business where payments to large retailers
for in-store advertising, preferential shelf-space, product listings etc.
are commonplace.
The GlaxoSmithKline Annual Report for the year ending 31st

December 2005 is the first Annual Report prepared under IFRS.
As 2003 is the earliest year for which full IFRS financial statements are
presented in the Annual Report 2005, the transition date to IFRS for
GlaxoSmithKline is 1st January 2003. Normally, accounting changes
of this nature would require full retrospective application, but GSK has
taken advantage of exemptions available under the IFRS transitional
rules to apply certain requirements only with effect from the transition
date of 1st January 2003 or, in the case of financial instruments, from
1st January 2005.
GSK believes that this reflects best practice in revenue recognition

and hence, in the absence of detailed guidance under IFRS, has
decided to adopt a revenue recognition policy under IFRS in line with
EITF 01-09. Therefore there is not expected to be any difference
between turnover reported under IFRS and turnover reported under
US GAAP. This adjustment has no impact on profit before tax or EPS.
Financial instruments
GSK has adopted IAS 39 as endorsed by the European Union.
However, one of the exemptions available under IFRS 1 relaxes the
requirement for comparative information presented in the Annual
Report 2005 to comply with IAS 32 and IAS 39. GlaxoSmithKline has
taken advantage of this exemption, and so, in 2003 and 2004, financial
instruments are accounted for and presented on a UK GAAP basis.
The previous UK GAAP approach to share-based payments was to
record any intrinsic loss on grant suffered by the company. This means
that for share options granted at the market price, there was no
charge to the income statement. Where shares or options were
granted at no cost to the employee (e.g. under long-term incentive
plans) the income statement was charged with an amount equal to
the market price on the date of the award, spread over the
performance period (usually three years).
On 1st January 2005 there was an adjustment of 12 million to the

opening balance sheet to reflect the movements from the UK GAAP
carrying values to the IAS 39 values, which for many financial
instruments will be fair value.
The financial instruments concerned are:
Held at fair value under IFRS with movements recorded in equity:
Equity investments
Liquid investments
Derivatives classified as cash flow hedging instruments
Held at fair value under IFRS with movements recorded in the
income statement:
Equity collar linked to the Groups investment in Quest Diagnostics
Inc.
Put and call options linked to the Groups strategic alliance with
Theravance Inc.
Other derivatives not classified as hedging instruments, including
embedded derivatives
Derivatives classified as fair value hedges together with the
hedged element of the relevant asset or liability
IFRS 2, Share-based Payment, and its UK GAAP equivalent FRS 20,

Share-based Payment, both of which came into force in 2005,
require the fair value of the equity instruments issued to be charged
to the income statement. The Group has chosen to recognise all
unvested options and awards retrospectively.
GSK receives a tax credit, as appropriate, which relates to share
options and awards when exercised, based on the gains the holders
make and dependent on the tax rules in the country in which the
deduction is claimed. The deferred tax asset represents an estimate
of future tax relief for this gain and is based on the potential gains
available to the option or award holders at the balance sheet date.
The movement in deferred tax asset from one balance sheet to the
next may result in either a tax credit or a tax charge recorded in the
income statement. The amount of any tax credit recognised in the
income statement is capped at the cumulative amount of the tax
effect of the share-based payment charge. Any excess credit is taken
to equity.
Presentation differences only:

Non-equity minority interests (repaid during 2004).
If the IAS 39 valuation rules had been applied in 2004 there would
have been a charge to profit before tax, the largest elements of which
arise from the Quest collar (42 million; 2003 42 million) and the
Theravance put and call options (53 million; 2003 nil). Valuations
are inherently unpredictable and changes in the fair values of financial
instruments could have a material impact on the future results and
financial position of GSK.
This adjustment reduced profit before tax in 2004 by 309 million

(2003 368 million), earnings by 314 million (2003 344 million)
and EPS by 5.5 pence (2003 5.9 pence).
150

continued
The share-based payments charge reduced to a more normal level of

236 million in 2005. The considerably higher charge in 2004 and
2003 arises from two main factors. Relatively few share options were
granted during 2000 when the GW/SB merger was being finalised,
but then in 2001 there was a full catch-up grant early in the year
followed by the normal annual grant in November 2001. In addition,
the grants in 2001 were made at an average share price in excess of
18. These share options became exercisable in 2004 and therefore
fell out of the charge in 2005, which now reflects more current share
prices and more normal grant levels.
Coreg capitalisation and amortisation

The North American rights to Coreg were acquired at the time of the
GW/SB merger as partial consideration for the required disposal of
Kytril to Roche. Under UK GAAP this was accounted for as an
exchange of assets with no value being attributed to Coreg on the
balance sheet. IFRS, however, requires the acquired rights to Coreg to
be added to intangible assets at their fair value on the date of
acquisition of $400 million, and then amortised over their remaining
useful life of eight years. This adjustment reduces 2004 profit before
tax by 27 million (2003 31 million) and EPS by 0.3 pence (2003
0.3 pence).
Other intangible assets amortisation
Under UK GAAP, GSK amortised intangible assets over their estimated
expected useful lives from acquisition, which was up to a maximum
of 15 years. IFRS only permits amortisation to commence when the
asset becomes available for use, with annual impairment testing
required before this point. GSK has determined that the point at which
amortisation of product-related assets commences under IFRS will
normally be regulatory approval. The majority of the Groups
intangible assets relates to the acquisition of rights to compounds in
development and so has not reached the point at which amortisation
commences. This has led to a reduction in the amortisation charge,
which is likely to reverse in the future as these compounds reach
regulatory approval and amortisation is then charged over a shorter
period. Profit before tax in 2004 increased by 43 million (2003 43
million) and EPS by 0.5 pence (2003 0.5 pence).
Goodwill amortisation
UK GAAP required goodwill to be amortised over its estimated
expected useful life, which GSK had determined to be normally no
longer than 20 years. Under IFRS, however, goodwill is considered to
have an indefinite life and so is not amortised, but is subject to annual
impairment testing. This adjustment therefore reverses the goodwill
amortisation charged under UK GAAP, including that recorded in the
profit on share of associates line relating to the acquisition of the
Groups interest in Quest Diagnostics Inc. Under the business
combinations exemption of IFRS 1, goodwill previously written off
direct to reserves under UK GAAP is not recycled to the income
statement on the disposal or part-disposal of the subsidiary or
associate, as it would be under UK GAAP. The adjustment increases
2004 profit before tax by 37 million (2003 26 million) and EPS by
0.7 pence (2003 0.4 pence).

GlaxoSmithKline accounted under UK GAAP for pensions and other
post-employment benefits (OPEBs) in accordance with SSAP 24, which
spread the costs of providing the benefits over the estimated average
service lives of the employees.
IAS 19, Employee Benefits, recognises surpluses and deficits in the
accounts, and in accordance with the transitional provisions of IFRS 1,
the surpluses and deficits have been recognised in full on the balance
sheet at the transition date of 1st January 2003. In addition, following
an amendment to IAS 19 issued by the IASB in December 2004, it is
permitted to recognise any movements in the surpluses or deficits
immediately in the balance sheet, but outside the income statement,
in the Statement of recognised income and expense. This means that,
in most cases, the balance sheet reflects the full surplus or deficit
positions of the funds.
The Groups policy is to charge out to the operating businesses the
service cost element of the pension charge, which then gets reported
within cost of sales, selling, general and administrative expenditure or
research and development as appropriate, but not to charge out the
element related to the funding deficit, which is all reported in selling,
general and administrative expenditure. Under IAS 19, the service
cost element of the total charge is considerably higher than under
SSAP 24 and the funding deficit element lower. This has led to an
additional reclassification adjustment between the income statement
expense headings.
The overall impact of the adjustments to pensions and OPEBs in 2004
was a decrease in profit before tax of 36 million (2003 increase of
11 million) and a decrease in EPS of 0.4 pence (2003 nil).
Share of profits of associates

Under UK GAAP the share of profits of associates was reported within
profit before tax for the Group. However, IFRS requires this share of
profits to be the net profit attributable to the Group, i.e. after interest,
tax and minority interests of the associate. This has led to a
reclassification adjustment removing the share of the associates
interest, tax and minority interests from those lines in the income
statement and netting them all together in the share of profits of
associates line. This adjustment reduced 2004 profit before tax by
42 million (2003 42 million) but did not affect EPS.
Deferred tax on intercompany profit
Under UK GAAP, deferred tax on the provision for intercompany profit
held in inventory is calculated at the supplying companys effective tax
rate. IFRS, however, takes a balance sheet approach to the recognition
of deferred tax which results in the tax rate of the company holding
the inventory at the balance sheet date being applied to the provision.
If the proportions of the Groups inventory held in specific locations
change significantly from one balance sheet date to the next there
could be a significant change in the value of the deferred tax asset,
which is reflected through the tax charge for the year.
151
40 Transition to IFRS continued

continued
Amortisation of goodwill under UK GAAP prior to the date of

transition to IFRS, 1st January 2003, has not been reversed.
Accordingly, goodwill recognised on the IFRS balance sheet is lower
in this respect than it would have been if GSK had not taken
advantage of the business combinations exemption
Other adjustments
There are a number of other minor adjustments and reclassifications,
including:
Computer software, which is recorded as an intangible asset unless
it forms an integral part of the operating system of a tangible fixed
asset
Share-based payments: IFRS 2, Share-based Payment, applies to

equity instruments, such as share options granted since 7th
November 2002, but GlaxoSmithKline has elected to adopt full
retrospective application of the standard
Deferred tax on brands acquired with a company, where if there is

a difference between the fair value of the brands on acquisition and
the tax value, a taxable temporary difference arises
Financial instruments: Financial instruments in the comparative

periods presented in the Annual Report 2005 (i.e. 2004 and 2003)
are recognised and measured on the UK GAAP basis applicable in
those years, rather than in accordance with IAS 39 Financial
Instruments: Recognition and Measurement. As a result, certain
derivative instruments, are not recognised in the comparative
periods. IFRS hedge accounting is not applied in the comparative
periods so hedged borrowings are recorded at amortised cost rather
than at fair value. Also, available-for-sale financial assets such as
equity investments and liquid investments are recorded at cost less
impairments rather than at fair value.
Cash equivalents reclassification, where liquid investments with

maturities of less than three months at acquisition are included
within cash and cash equivalents
Provisions reclassification, where the elements of provisions expected
to be paid within one year of the balance sheet date, with the
exception of pensions and OPEBs, are presented within current
liabilities.
Cash flow statement

The move from UK GAAP to IFRS does not change any of the cash
flows of the Group. The IFRS cash flow format is similar to UK GAAP
but presents various cash flows in different categories and in a
different order from the UK GAAP cash flow statement. All of the
IFRS accounting adjustments net out within cash generated from
operations except for the intangible assets reclassification and the
inclusion of liquid investments with a maturity of less than three
months on acquisition, together with related exchange adjustments,
within cash and cash equivalents under IFRS.
IFRS 1 exemptions and elections
IFRS 1, First-Time Adoption of International Financial Reporting
Standards, permits those companies adopting IFRS for the first time
to take some exemptions from the full requirements of IFRS in the
transition period or to make elections to apply IFRS with full
retrospective effect where not required to do so. GSK has adopted the
following key exemptions and elections:
Business combinations: Business combinations prior to the transition
date (1st January 2003) have not been restated onto an IFRS basis.
If the merger of Glaxo Wellcome and SmithKline Beecham in 2000
had been restated onto an IFRS basis it would have been accounted
for as an acquisition. Fair value adjustments to the net assets of the
acquired company would have been required, including the
recognition of significant intangible asset balances for product rights
relating to both marketed products and in-process R&D, which were
not recognised under merger accounting. A significant goodwill
balance would also have been recorded
Goodwill written off to reserves prior to 1998 under old UK GAAP
is not written back to goodwill. If the business combinations
exemption had not been taken, additional goodwill balances
relating to acquisitions prior to 1998 would have been recognised
on the IFRS balance sheet
152

continued

IFRS Consolidated income statement
12 months 2004
UK GAAP
m
Adjustments
m
IFRS
m
12 months 2003
UK GAAP
m
Adjustments
m
IFRS
m
Turnover
Cost of sales
20,359
(4,309)
(373)
(51)
19,986
(4,360)
21,441
(4,544)
(371)
(33)
21,070
(4,577)
Gross profit
16,050
(7,061)
(2,839)
(60)
(424)
(140)
(65)
295
15,626
(7,201)
(2,904)
235
16,897
(7,597)
(2,791)
(133)
(404)
(291)
(74)
443
16,493
(7,888)
(2,865)
310
6,090
102
(305)
95
138
(334)
74
(57)
(35)
11
5,756
176
(362)
60
149
6,376
61
(222)
93
(326)
40
(32)
(36)
6,050
101
(254)
57
6,120
(1,701)
(1)
(341)
(56)
1
5,779
(1,757)
6,308
(1,729)
5
(354)
78
5,954
(1,651)
5
4,418
(396)
4,022
4,584
(276)
4,308

116
4,302
(2)
(394)
114
3,908
106
4,478
1
(277)
107
4,201
Operating profit
Finance income
Finance costs
Share of profits/(losses) of associates and joint ventures
Profit on disposal of interests in associates
Taxation
(Loss)/profit on disposal of businesses

75.0p
74.8p
(6.9)p
(6.8)p
68.1p
68.0p
77.1p
76.9p
(4.8)p
(4.8)p
72.3p
72.1p
31st December 2004

UK GAAP
m
Exchange movements on overseas net assets

Tax on exchange movements and unrealised gains
Goodwill written back
Revaluation of goodwill due to exchange
Unrealised (loss)/profit on disposal of intellectual property
Actuarial gains/(losses) on defined benefit plans
Deferred tax on actuarial movements on defined benefit plans
Net (losses)/gains recognised directly in equity
Adjustments
m
IFRS
m
31st December 2003

UK GAAP
m
Adjustments
m
IFRS
m
(54)
(73)
20
6
(1)
(20)
1
108
(17)
(47)
(73)
108
(17)
113
(92)
(7)
7
(60)
2
(7)
(432)
121
53
(90)
(7)
(432)
121
(102)
79
(23)
21
(376)
(355)
Profit for the year
4,418
(396)
4,022
4,584
(276)
4,308
Total recognised income and expense for the year
4,316
(317)
3,999
4,605
(652)
3,953
153
IFRS Consolidated statement of recognised income and expense

continued

IFRS Consolidated balance sheet
31st December 2004
UK GAAP
m
Non-current assets
Goodwill
Other investments
Deferred tax assets
Current assets
Inventories
Liquid investments
Adjustments
m
31st December 2003
IFRS
m
UK GAAP
m
Adjustments
m
IFRS
m
6,471
139
2,003
187
298
1,537
597
(274)
165
510
22
495
14
6,197
304
2,513
209
298
2,032
611
6,441
143
1,697
196
262
1,441
522
(285)
151
533
14
498
9
6,156
294
2,230
210
262
1,939
531
11,232
932
12,164
10,702
920
11,622
2,193
155
4,451
1,512
2,467
2
2,109
4,934
2,493
962
239
(439)
(1,024)
1,024
2,109
239
4,495
1,469
1,986
2,192
5,175
2,818
1,161
1
155
(724)
(1,306)
1,306
2
11,346
(566)
10,780
10,498
(200)
10,298
Total assets
22,578
366
22,944
21,200
720
21,920
Current liabilities
Current tax payable
(1,582)
(5,542)
(1,598)
1,275
(155)
(962)
(1,582)
(4,267)
(1,753)
(962)
(1,452)
(5,561)
(1,458)
1,364
(239)
(968)
(1,452)
(4,197)
(1,697)
(968)
(8,722)
158
(8,564)
(8,471)
157
(8,314)
Other provisions
(4,381)
(710)
(785)
(1,534)
(244)
141
(1,734)
965
(161)
(4,381)
(569)
(2,519)
(569)
(405)
(3,651)
(618)
(807)
(1,617)
(232)
253
(2,137)
962
(161)
(3,651)
(365)
(2,944)
(655)
(393)
(789)
(8,443)
(6,925)
(1,083)
(8,008)
(631) (17,007)
(15,396)

Total liabilities
(7,654)
(16,376)
(926) (16,322)
Net assets
6,202
(265)
5,937
5,804
(206)
5,598
Equity
Share capital
Retained earnings
Other reserves
1,484
304
4,781
(644)
(239)
38
1,484
304
4,542
(606)
1,487
264
4,112
(804)
(153)
11
1,487
264
3,959
(793)
Shareholders equity
5,925
(201)
5,724
5,059
(142)
4,917
277
(64)
213
745
(64)
681
6,202
(265)
5,937
5,804
(206)
5,598
Minority interests
Total equity
154

continued

Analysis of IFRS adjustments to the income statement
Year ended 31st December 2004
Other
intangible
assets
amortisation
m
Goodwill
amortisation
m
Pensions
and OPEBS
m
Share of
profits of
associates
m
Other
m
IFRS
adjustments
m
Turnover
Cost of sales
(373)
14
(36)
(16)
(13)
(373)
(51)
Gross profit
(359)
359
(36)
(182)
(91)
(27)
43
12
(16)
(3)
(17)
(13)
(299)
295
(424)
(140)
(65)
295
Operating profit
Finance income
Finance costs
Share of profits/(losses) of associates
and joint ventures
Profit on disposal of interests in
associates
(309)
(27)
43
12
(36)
(17)
74
(64)
(334)
74
(57)
14
(49)
(35)
11
11

Taxation
Profit on disposal of businesses
(309)
(5)
(27)
9
43
(12)
37
(36)
13
(42)
40
(7)
(101)
(341)
(56)
1
(314)
(18)
31
38
(23)
(2)
(108)
(396)

(314)
(18)
31
38
(23)
(2)
(108)
(2)
(394)
(5.5)p
(0.3)p
0.5p
0.7p
(0.4)p
(1.9)p
(6.9)p
Reconciliation of opening equity by component of equity

At 1st January 2003
Share
capital
m
Share
premium
account
m
1,506
224
IFRS adjustments (net of tax):

Pensions
Deferred profit on stock
Dividends
Deferred tax on indefinite life assets
Coreg
Tax on share-based payments
Other
Total IFRS adjustments
UK GAAP
IFRS
Retained
earnings
m
Total
shareholders
equity
m
Minority
interests
m
Total
equity
m
(921)
3,031
3,840
807
4,647
(5)
(1,456)
249
1,287
(300)
126
45
5
48
30
(1,456)
249
1,287
(300)
126
45
48
30
(64)
(1,456)
249
1,287
(300)
126
45
48
(34)
(5)
34
29
(64)
(35)
1,506
224
(926)
3,065
3,869
743
4,612
155
Other
reserves
m
Customer
allowances
m
Sharebased
Coreg
payments amortisation
m
m

continued

Analysis of IFRS balance sheet adjustments
Coreg
capitalisation
Dividend Share-based
and
deferred
payments amortisation
m
m
m
Other
intangible
Goodwill
assets amortisation
amortisation
reversal
m
m
Pensions
and OPEBS
m
Other
m
IFRS
adjustments
m
Non-current assets
Goodwill
Other investments
Deferred tax assets
67
104
(34)
148
(29)
26
22
324
14
(274)
139
258
167
(274)
165
510
22
495
14
67
70
119
48
338
290
932
Current assets
Inventories
Liquid investments
(724)
1
155
(1,306)
1,306
2
1
155
(724)
(1,306)
1,306
2
(724)
158
(566)
Total assets
67
70
119
48
(386)
448
366
Current liabilities
Current tax payable
1,254
21
(155)
(962)
1,275
(155)
(962)
1,254
21
(1,117)
Other provisions
(27)
472
(1,734)
3
(304)
962
(161)
141
(1,734)
965
(161)
(27)
(1,259)
497
(789)
158
Total liabilities
1,254
(27)
(1,238)
(620)
(631)
Net assets
1,254
67
70
92
48
(1,624)
(172)
(265)
Equity
Share capital
Retained earnings
Other reserves
1,254
29
38
70
92
48
(1,619)
(113)
(239)
38
Shareholders equity
1,254
67
70
92
48
(1,619)
(113)
(201)
(5)
(59)
(64)
1,254
67
70
92
48
(1,624)
(172)
(265)
Minority interests
Total equity
156

continued
41 Legal proceedings
The Group holds other US patents relating to Advair which are not
affected by the re-issue application, including the compound patent
related to the active ingredient salmeterol which affords protection
through August 2008 (after giving effect to an expected grant of
paediatric exclusivity by the FDA) and various patents relating to the
Diskus device which expire over a period from 2011 to 2016.
The Group is involved in significant legal and administrative

proceedings, principally product liability, intellectual property, tax, antitrust and governmental investigations and related private litigation.
The Group makes provision for these proceedings on a regular basis
as summarised in Notes 2 and 27. The Group may make additional
significant provisions for such legal proceedings as required in the
event of further developments in these matters, consistent with
generally accepted accounting principles. Litigation, particularly in the
USA, is inherently unpredictable and excessive awards that may not
be justified by the evidence may occur. The Group could in the future
incur judgments or enter into settlements of claims that could result
in payments that exceed its current provisions by an amount that
would have a material adverse effect on the Groups financial
condition, results of operations and/or cash flows.
Avandia and Avandamet

In August 2003, the Group filed an action in the US District Court for
the District of New Jersey against Teva Pharmaceuticals USA Inc. for
infringement of the Groups patent relating to the maleate salt form
of rosiglitazone, the active ingredient in Avandia, which expires in
2015. In September 2003, the Group filed a comparable action in
the same court against Dr Reddys Laboratories, alleging infringement
of the same patent. Those actions were filed in response to
Abbreviated New Drug Application (ANDA) filings with the FDA by Dr
Reddys Laboratories and Teva with certifications that the Groups
maleate salt patent is invalid. FDA approval of those ANDAs is stayed
until the earlier of November 2006 or resolution of the respective
patent infringement actions.
Intellectual property claims include challenges to the validity of the

Groups patents on various products or processes and assertions of
non-infringement of those patents. A loss in any of these cases could
result in loss of patent protection for the product at issue. The
consequences of any such loss could be a significant decrease in sales
of that product and could materially affect future results of operations
for the Group.
Legal expenses incurred and provisions related to legal claims are
charged to selling, general and administration costs. Provisions are
made, after taking appropriate legal advice, when a reasonable
estimate can be made of the likely outcome of the dispute. In 2004
the Group established an actuarially determined provision for product
liability claims incurred but not yet reported as described in Note 27.
At 31st December 2005 the Groups aggregate provision for legal
and other disputes (not including tax matters described under
Taxation in Note 12 ) was over 1.1 billion. The ultimate liability for
legal claims may vary from the amounts provided and is dependent
upon the outcome of litigation proceedings, investigations and
possible settlement negotiations.
In January 2005, the Group filed an action in the US District Court for
the District of New Jersey against Teva for infringement of the same
two patents the basic compound and maleate salt patents for
rosiglitazone. Teva had filed an ANDA with the FDA for a generic
version of Avandamet with a certification that those patents are invalid
or not infringed. FDA approval of that ANDA is stayed until the earlier
of June 2007 or resolution of the patent infringement action. Since
Avandamet is protected by the same patents as Avandia, any earlier
holding of invalidity in the Avandia cases would be dispositive for
Avandamet as well.
The most significant of those matters are described below.
Imitrex
In December 2003, the Group commenced an action in the US District
Court for the Southern District of New York against Dr Reddys
Laboratories, alleging infringement of one of the two primary
compound patents for sumatriptan, the active ingredient in Imitrex.
The patent at issue affords protection through February 2009 after
giving effect to a grant of paediatric exclusivity by the FDA. The
defendant had filed an ANDA with the FDA for sumatriptan oral
tablets with a certification of invalidity of that compound patent but
did not certify invalidity or non-infringement of the other compound
patent that expires in June 2007 after giving effect to paediatric
exclusivity.
Advair
In September 2004, the Group applied to the US Patent and
Trademark Office (USPTO) for re-issue of its combination patent for
Advair, an inhaled combination of salmeterol and fluticasone
propionate, which expires in September 2010. This followed an
internal review which concluded that the language in the patent may
not accurately describe all of the circumstances of the invention and
may not claim the invention as precisely as it could. The objective of
seeking re-issuance is to strengthen the protection afforded by the
patent. In January 2006, the USPTO issued a final office action
rejecting that application. The Group will seek reconsideration of the
rejection, and a response to the USPTO is expected in the first half of
the year. While the application for re-issue remains pending, the
patent remains in force and is listed in the register of pharmaceutical
patents maintained by the US Food and Drug Administration (FDA)
(the Orange Book).
In March 2004, the Group commenced an infringement action

against Cobalt Pharmaceuticals which was transferred to the US
District Court for the Southern District of New York. The defendant
had filed an ANDA for sumatripan oral tablets with a certification of
invalidity or non-infringement of the same compound patent at issue
in the Dr Reddys case. Final pre-trial conference in the consolidated
Dr Reddys and Cobalt case is scheduled for May 2006.
157
Teva subsequently filed an additional certification challenging the

validity of the Groups basic compound patent for rosiglitazone, and
in January 2004 the Group commenced an action against Teva in the
same court for infringement of that patent. The basic compound
patent currently expires in 2012 after giving effect to patent term
restoration and paediatric exclusivity.

continued
41 Legal proceedings continued
Between 1999 and 2001, the Group filed further actions against
Apotex in the US District Court for the Eastern District of Pennsylvania
for infringement of additional of the Groups patents. In December
2002, the judge granted in part and denied in part summary
judgment motions filed by Apotex with the result that issues of validity
and infringement of three of the four additional patents remained
for trial. In July 2004, the judge certified the patent that had been
held invalid for appeal to the CAFC. In February 2006, the CAFC
affirmed the judges ruling of invalidity of that patent.
In February 2005, the Group commenced an infringement action in

the US District Court for the District of Delaware against Spectrum
Pharmaceuticals. The defendant had filed an ANDA for injectable
sumatriptan with a certification of invalidity or non-infringement of
the same compound patent at issue in the Dr Reddys and Cobalt
cases. Trial date in this case is set at November 2006.
Lamictal
In August 2002, the Group commenced an action in the US District
Court for the District of New Jersey against Teva Pharmaceuticals USA
Inc., alleging infringement of the Groups compound patent for
lamotrigine, the active ingredient in Lamictal oral tablets. That patent
affords protection through January 2009 after giving effect to a grant
of paediatric exclusivity by the FDA. Teva had filed an ANDA with the
FDA with a certification of invalidity of the Groups patent. The parties
reached a settlement agreement pursuant to which the Group has
granted Teva an exclusive royalty-bearing license to distribute in the
USA a generic version of lamotrigine chewable tablets. In addition,
Teva was granted the exclusive right to manufacture and sell Tevas
own generic version of lamotrigine tablets in the USA with an
expected launch date in 2008.
The Group also commenced actions in the US District Court for the
Eastern District of Pennsylvania against Geneva, Alphapharm, Andrx
Pharmaceuticals, Zenith and Teva Pharmaceuticals in connection with
their ANDA filings for Paxil and BASF and Sumika Fine Chemicals in
connection with their supply of paroxetine hydrochloride for use in
ANDAs. Those lawsuits have been settled or stayed pending resolution
of the appeals in the Apotex case. Apotex launched its generic product
in the USA in September 2003. Additional generic products were
launched by other defendants after March 2004.
The Groups US patent litigation with Synthon BV was settled in
December 2003 enabling US marketing of Synthons paroxetine
mesylate product. This was followed with settlement in August 2004
of most of the Groups non-US patent litigation with Synthon as a
consequence of which Synthon is free to market its paroxetine
mesylate product in many markets globally where it has obtained
marketing authorisations. Resolution of damages in respect of several
country markets remains outstanding. Paroxetine mesylate is a
different salt form of paroxetine than that used in the marketed form
of Seroxat/Paxil. In certain markets litigation with Synthon is ongoing
and Synthon is asserting counterclaims for unfair competition against
the Group.
Paxil/Seroxat
In the USA a number of distributors of generic drugs filed applications
with the FDA to market generic versions of Paxil/Seroxat (paroxetine
hydrochloride) prior to the expiration in 2007 (after giving effect to a
grant of paediatric exclusivity by the FDA) of the Groups patent on
paroxetine hyrdrochloride hemihydrate. These distributors sought to
bring to market anhydrate or other versions of paroxetine
hydrochloride and in one case paroxetine mesylate. In response the
Group filed actions against all those distributors for infringement of
various of the Groups patents on the basis that the generic anhydrate
and other versions infringe because they contain and/or convert to the
hemihydrate form and/or infringe other Group patents.
Generic products containing the anhydrate form of paroxetine

hydrochloride are now on the market in most European countries.
Whilst some of these products are the subject of continuing litigation,
most actions have now been settled and it is expected that more will
be settled in the future. In the UK, litigation of several years standing
between the Group and Apotex culminated in an Appeal Court
decision that the Groups anhydrate process patent was valid but not
infringed. As a result of the litigation, Apotex was enjoined from
launching a product for about one year but is now on the market. A
damages enquiry relating to the injunction is ongoing. A settlement
of damages claim has been reached with one of Apotexs local
distributors.
In July 1998, GSK filed an action against Apotex in the US District

Court for the Northern District of Illinois for infringement of the
Groups patent for paroxetine hydrochloride hemihydrate. Apotex had
filed an ANDA with the FDA seeking approval to introduce a generic
form of Paxil. Following a trial in February 2003 the judge ruled GSKs
patent valid but not infringed by Apotexs product. On the Groups
appeal the US Court of Appeals for the Federal Circuit (CAFC), which
hears all appeals from US District Courts on patent matters, ruled that
the Groups patent was infringed but invalid based upon public use
in clinical trials prior to the filing date in the USA. The Group filed a
petition to the CAFC for rehearing on its appeal by the full court and
in April 2005 the full CAFC vacated that judgment and remanded the
matter to the same panel. Concurrently with entry of that decision,
the panel issued a new opinion ruling the same patent invalid under
an alternative theory. The Groups request for a rehearing by the full
court of the panels new decision was denied and the Group has filed
a petition for review by the US Supreme Court.
Paxil CR
In November 2005, Mylan Pharmaceuticals filed an ANDA for Paxil CR
(paroxetine hydrochloride controlled release formulation) with a
certification of invalidity and non-infringement of several patents listed
in the FDA Orange Book. There was no certification of invalidity or
non-infringement of the patent covering paroxetine hydrochloride
hemihydrate, which Mylan admitted is the active ingredient in its
product. That patent expires in June 2007 after giving effect to a grant
of paediatric exclusivity by the FDA. As the Group did not file a patent
infringement action against Mylan within the 45-day period provided
under Hatch-Waxman, there will be no 30-month stay against FDA
approval of the Mylan ANDA to conduct patent litigation.
158

continued
Zofran
In August 2001, the Group commenced an action in the US District
Court for the District of New Jersey against Reddy-Cheminor and Dr
Reddys Laboratories. Dr Reddy had certified invalidity of three patents
for ondansetron, the active ingredient in Zofran tablets, including the
compound patent that expired in July 2005 and two method of use
patents, the later of which expires in December 2006, in both
instances taking into account the extension for paediatric exclusivity.
In July 2003, the Group filed an action against Dr Reddys Laboratories
in the same district court for infringement of the Groups patents
related to the orally disintegrating tablet presentation of Zofran. In
October 2003, the Group filed an action against West-ward
Pharmaceuticals, Inc. in the same district court for infringement of
the Groups patents related to an injectable presentation of Zofran.
Both the Dr Reddy disintegrating tablet case and the West-ward case
were consolidated with the earlier Dr Reddy case.
Requip
In April 2005, the Group commenced an action in the US District
Court for the District of Delaware against Teva Pharmaceutical USA
Inc. alleging infringement of the Groups compound patent for
ropinirole hydrochloride (the active ingredient in Requip) and a
method of use patent for treatment of Parkinsons disease, both of
which are listed in the FDA Orange Book. The compound patent
expires in December 2007 and the method of use patent in May
2008. The defendant filed an ANDA with the FDA with a certification
of invalidity and non-infringement of those patents. FDA approval of
that ANDA is stayed until the earlier of August 2007 or resolution of
the patent infringement action. The case is progressing through the
discovery stage.
Valtrex
In May 2003, the Group commenced an action in the US District
Court for the District of New Jersey against Ranbaxy Laboratories,
alleging infringement of the Groups compound patent for valaciclovir,
the active ingredient in Valtrex. That patent expires in 2009. The
defendant has filed an ANDA with the FDA with a certification the
Groups compound patent was invalid or not infringed. In August
2004, Ranbaxy filed a motion for partial summary judgment on
grounds that the patent was invalid for being in public use more
than one year before the filing of the patent application and the
Group filed a motion that the patent was not invalid on those
grounds. In March 2005, the court ruled in the Groups favour that
the patent was not invalid on those grounds. Discovery is substantially
completed.
In March 2002, the Group filed a similar action against Teva

Pharmaceuticals USA Inc. in the US District Court for the District of
Delaware alleging infringement of the two method of use patents for
ondansetron. Teva had certified invalidity or non-infringement of the
two method of use patents. Teva did not challenge the compound
patent. The trial judge ruled in the Groups favour, upholding the
validity of the method of use patents. Following an appeal by Teva to
the CAFC, the parties reached a settlement agreement, the terms of
which are confidential.
Wellbutrin XL
In December 2004, Biovail commenced actions in the US District Court
for the Central District of California against Anchen Pharmaceuticals
and in the US District Court for the Southern District of Florida against
Abrika Pharmaceuticals, in each case alleging infringement of Biovail
formulation patents for Wellbutrin XL. In April 2005, Biovail filed an
action in the US District Court for the Eastern District of Pennsylvania
against Impax Laboratories for infringement of the same patents.
Those patents expire in 2018. Each of Anchen, Abrika and Impax had
filed an ANDA with the FDA with a certification of invalidity or noninfringement of the Biovail patents. The Group is the licensee under
those patents. A hearing on Abrikas motion for summary judgment
was heard in November 2005 but as of the date of this report no
decision has been announced. A trial date for Biovails action against
Anchen has been set for 12th September 2006. The Group is not a
party to any of those actions. In September 2005, Biovail commenced
actions in the US District Court for the Southern District of New York
against Watson Laboratories alleging infringement of the Biovail
formulation patents. The Group remains a third party counterclaim
defendant based on listing activities associated with the FDA Orange
Book.
In January 2003, the Group commenced an action against Kali

Laboratories (now Par Pharmaceutical Company) in the US District
Court for the District of New Jersey involving orally disintegrating
Zofran tablets. The trial judge denied Kalis summary judgment motion
and granted the Groups summary judgment motions in June 2005
and July 2005, affirming the validity of the Groups method of use
patents and holding that Kalis proposed generic product would
infringe those patents. Kali has filed a notice of appeal with the CAFC
from that ruling. As of the date of this report no hearing date for that
appeal has been announced.
In June 2003, the Group commenced an action in the US District
Court for the District of New Jersey against the Faulding
Pharmaceutical Company (now Mayne Pharma Inc.) alleging
infringement of the two method of use patents for ondansetron.
Faulding did not challenge the compound patent. That case, as of the
date of this report, has been stayed pending decisions in the
Reddy/West-ward case.
Additional actions remain pending against generic distributors which
are asserting that their products do not infringe the Groups patent
for a reduced crystal size of ondansetron, which expires in March
2012 taking into account the extension for paediatric exclusivity, but
which are not asserting invalidity or non-infringement of the Groups
compound patents or emesis use patent.
In December 2005, Andrx Pharmaceuticals filed an action against the

Group in the US District Court for the Southern District of Florida,
alleging that the manufacture, importation and sale of the 150 mg
Wellbutrin XL product infringes a patent issued to Andrx in June 2005
and asking for treble damages, attorneys fees and that the Group and
others acting in concert with it be enjoined. The case is in its early
stages.
159
Prior to the trial both Reddy-Cheminor and West-ward withdrew their

challenge to the compound patent. The trial over infringement and
validity of the Groups method of use and process patents was
completed in June 2004 and closing arguments were heard in May
2005 but as of the date of this report no decision has been
announced.

continued
The federal cases have been consolidated in a multidistrict litigation

proceeding in the US District Court for the District of Washington. The
judge responsible for those proceedings has denied class certification
and struck all class allegations in the federal personal injury and
consumer refund class actions. Class certification has been denied in
California state court and a Pennsylvania state court putative class
action has been dismissed, leaving no putative class actions pending
against the Group in this litigation. A substantial number of cases in
which the Group or other manufacturers are defendants have reached
trial in state and federal courts. Manufacturers have for the most part
received favourable outcomes at trial.
Product liability
Paxil
The Group has received lawsuits and claims filed on behalf of patients
alleging that they have suffered symptoms on discontinuing treatment
with Paxil (paroxetine). Separately, the Group has received lawsuits and
claims that patients who had commenced Paxil treatment committed
or attempted to commit suicide and/or acts of violence. There are also
private consumer lawsuits alleging that the Group concealed and
misrepresented data from paediatric clinical trials of Paxil.
The Group has received lawsuits filed in state and federal courts in the
USA and Canada on behalf of thousands of plaintiffs, including
purported class actions, alleging that paroxetine (the active ingredient
in Paxil) is addictive and causes dependency and withdrawal reactions.
Plaintiffs sought remedies including compensatory, punitive and
statutory damages and the cost of a fund for medical monitoring. In
2003, a federal judge in the US District Court for the Central District
of California denied class action certifications for a nationwide class
and a California statewide class as to cases filed in federal court in that
district. Subsequently, on petition from plaintiffs counsel all federal
court cases were transferred to that District Court for consolidation
in Multidistrict Litigation (MDL). In January 2006, the Group concluded
settlement of more than 90% of the pending claims based on
symptoms on discontinuing Paxil treatment. Most of the pending
purported class actions are being dismissed as part of the settlement.
The Group did not, as part of the settlement, admit any liability with
respect to the allegations in any of the suits. Litigation in respect of
the balance of the lawsuits, including a purported class action in
California state court, continues.
Baycol
In August 2001, Bayer AG withdrew Baycol (cerivastatin sodium)
worldwide in light of reports of adverse events, including deaths,
involving rhabdomyolosis. GSK had participated in the marketing of
Baycol in the USA pursuant to a co-promotion agreement with Bayer
which was the licence holder and manufacturer of the product.
Following the withdrawal, Bayer and GSK have been named as
defendants in thousands of lawsuits filed in state and federal courts
in the USA on behalf of both individuals and putative classes of former
Baycol users. A number of the suits allege that the plaintiffs have
suffered personal injuries, including rhabdomyolosis, from the use of
Baycol. Others claim that persons who took Baycol, although not
injured, may be at risk of future injury or may have suffered economic
damages from purchasing and using Baycol. Plaintiffs seek remedies
including compensatory, punitive and statutory damages and creation
of funds for medical monitoring.
GSK and Bayer Corporation, the principal US subsidiary of Bayer AG,
have signed an allocation agreement under which Bayer Corporation
has agreed to pay 95% of all settlements and compensatory damages
judgments with each party retaining responsibility for its own
attorneys fees and any punitive damages. The federal cases have
been consolidated in a multidistrict litigation proceeding in the US
District Court for the District of Minnesota. Numerous cases are
scheduled for trial in state and federal courts during 2006. To date two
statewide class actions have been certified a medical monitoring
case in Pennsylvania and a Consumer Fraud and Deceptive Business
Practices Act case in Illinois. The medical monitoring action was
dismissed by the court on summary judgment. Another class action,
in which GSK was not named as a defendant, has been certified in
Oklahoma. A substantial number of claims for death or serious injury
have been settled and many others alleging muscle aches and pains
have been voluntarily or involuntarily dismissed.
The Group has received numerous claims and lawsuits alleging that
treatment with Paxil has caused homicidal or suicidal behaviour
exhibited by users of the product. None of these are or purport to be
class actions. In January 2005, the FDA approved a black box warning
about suicidal thoughts or behaviour in paediatric patients and other
strengthened warnings for selective serotonin reuptake inhibitor (SSRI)
products, including Paxil, as a class.
Avandia
The Group has received lawsuits and claims filed in state and federal
courts in the USA on behalf of numerous patients alleging that
rosiglitazone (the active ingredient in Avandia) has caused congestive
heart failure or liver damage. None of the cases purports to be a class
action. Most of the cases are in their early stages.
Phenylpropanolamine
Following a report from the Yale Haemorrhagic Stroke Project that
found a suggestion of an association between first use of
phenylpropanolamine (PPA) decongestant and haemorrhagic stroke,
the Group and most other manufacturers have voluntarily withdrawn
consumer healthcare products in which PPA was an active ingredient.
Since the PPA product withdrawal the Group has been named as a
defendant in numerous personal injury and class action lawsuits filed
in state and federal courts alleging personal injury or increased risk of
injury from use of products containing PPA and unfair and deceptive
business practices. Plaintiffs seek remedies including compensatory
and punitive damages and refunds.
160

continued
Sales and marketing and regulation

Marketing and promotion
In February 2004, GSK received a subpoena from the US Attorneys
office in Colorado regarding the Groups sales and promotional
practices relating to nine of its largest selling products for the period
from January 1997 to the present. In particular the government has
inquired about alleged promotion of these drugs for off-label uses as
well as Group sponsored continuing medical education programmes,
other speaker events, special issue boards, advisory boards, speaker
training programmes, clinical studies, and related grants, fees, travel
and entertainment. Although the original subpoena issued from the
US Attorneys office in Colorado, the scope of the inquiry is
nationwide. The Group is co-operating with the investigation and
providing the requested information. The Group had earlier responded
to an October 2002 letter from the FDAs Division of Drug Marketing,
Advertising and Communication requesting information on the
Groups alleged promotion of Wellbutrin SR for off-label use.
Fen-Phen
In 1997, the FDA became aware of reports of cardiac valvular
problems in individuals for whom fenfluramine or dexfenfluramine
alone or in combination with phentermine was prescribed as part of
a regimen of weight reduction and requested the voluntary
withdrawal of fenfluramine and dexfenfluramine from the market.
The reports of cardiac valvular problems and the subsequent
withdrawal of those products from the market spawned numerous
product liability lawsuits filed against the manufacturers and
distributors of fenfluramine, dexfenfluramine and phentermine. As
one of a number of manufacturers of phentermine, the Group
remains a defendant in approximately two hundred of several
thousand lawsuits that were filed in various state and federal district
courts in the USA against the Group and other defendants.
Most of the lawsuits seek relief including some combination of
compensatory and punitive damages, medical monitoring and refunds
for purchases of drugs. In 1997, the Judicial Panel on Multidistrict
Litigation issued an order consolidating and transferring all federal
actions to the District Court for the Eastern District of Pennsylvania.
That court approved a global settlement proposed by defendant
Wyeth, which sold fenfluramine and dexfenfluramine. The settlement,
subsequently approved by the Third Circuit Court of Appeals, does not
include any of the phentermine defendants, including the Group.
Individual plaintiffs may elect to opt out of the class settlement and
pursue their claims individually and tens of thousands of plaintiffs
have elected to do so. Wyeth continues to settle individual state court
cases before trial and the Group continues to be dismissed from
lawsuits as they are settled by Wyeth.
Thimerosal
GSK, along with a number of other pharmaceutical companies, has
been named as a defendant in numerous individual personal injury
lawsuits in state and federal district courts in the USA alleging that
thimerosal, a preservative used in the manufacture of vaccines, causes
neurodevelopmental disorders and other injuries, including autism.
Three of the cases are purported class actions although there has
been no determination whether any of those cases will be permitted
to proceed as a class action. A number of purported class actions in
other jurisdictions have been withdrawn or dismissed. Plaintiffs seek
remedies including compensatory, punitive and statutory damages
and the cost of a fund for medical monitoring and research. As of the
date of this report there are no cases scheduled for trial in 2006.
On 22nd February 2006, the FDA approved an ANDA filed by Roxane

Laboratories for a generic form of Flonase nasal spray and denied two
citizens petitions that had been filed by the Group concerning
regulatory criteria that should be applied in determining whether
proposed generic products are bioequivalent to, and have the same
quality control standards as, Flonase. On 23rd February the US District
Court for the District of Maryland granted a temporary restraining
order suspending the FDAs approval of the Roxane ANDA for ten
days. The Group will file a motion for a preliminary injunction to
continue the interim relief granted in the temporary restraining order
and will request a ruling on such motion before the temporary
restraining order (as it may be extended for up to an additional ten
days) expires.
Lotronex
Following the voluntary withdrawal of Lotronex in the USA in
November 2000 a number of lawsuits have been filed against the
Group in state and federal district courts, including individual personal
injury actions and purported class actions asserting product liability
and consumer fraud claims. Plaintiffs seek remedies including
compensatory, punitive and statutory damages. The class previously
certified in West Virginia has been decertified and the action has been
dismissed. A large number of claims brought following the withdrawal
have now been settled. Lotronex was reintroduced in the USA in 2002
subject to a risk management plan imposing additional protections
around the prescribing and dispensing of Lotronex.
In February 2003, the Verona Public Prosecutor commenced a criminal

investigation into GSKs sales and marketing practices in Italy. Specific
areas of investigation include medical education programmes, clinical
studies and congresses as well as the interaction between GSK
representatives and physicians. Similar issues are being investigated by
the Bari public prosecutor. The US Securities and Exchange
Commission (SEC) staff has initiated an informal investigation into
the allegations. The Group is co-operating with all these investigations.
In February 2006, the Group received a subpoena from the SEC in
respect of the Groups participation in the United Nations Oil for Food
Programme. The Group is co-operating with the SEC and providing
documents responsive to the subpoena.
161
In June 2005, the Group and other pharmaceutical manufacturers

received a letter from the Senate Finance Committee in which the
Committee expressed concern that educational grants were being
improperly used to promote drug products and requesting that each
company provide detailed information and documents about its use
of educational grants. In January 2006, the Group and the same
manufacturers received a second letter from the Committee asking
for additional information on the Groups internal grant approval
process, grants to medical/physician/professional organizations,
academic institutions or state agencies to support journal articles and
other publications and grants to patient education or advocacy
groups. The Group is co-operating in the Committees investigation
and providing the requested information.

continued
Paxil/Seroxat
Following announcement of the New York State Attorney Generals
office of the states lawsuit, subsequently settled in August 2004,
alleging failure to disclose data on the use of Paxil in children and
adolescents, similar cases, some of which purport to be class actions,
have been filed in state and federal and Canadian courts by private
plaintiffs. The Group is responding to discovery requests in those cases.
Average wholesale price

GSK has responded to subpoenas from the Office of the Inspector
General of the US Department of Health and Human Services (HHS),
the US Department of Justice and the states of Texas and California
in connection with allegations that pharmaceutical companies,
including GSK, have violated federal fraud and abuse laws such as the
Federal False Claims Act (and, with respect to Texas and California,
comparable state laws) as a result of the way average wholesale price
(AWP) was determined and reported for certain drugs and the way
the Medicare and Medicaid programs reimburse for those drugs. In
September 2005, the Group reached a civil settlement with the US
Department of Justice, the US Attorney for the District of
Massachusetts and the Office of the Inspector General for HHS. The
Group agreed to pay the government a civil settlement of $149
million. As part of the settlement the corporate integrity agreement
which the Group signed in April 2003 in connection with a prior
government investigation of Medicaid rebate issues was amended to
address issues raised in the course of this investigation.
In the UK an investigation remains pending by the UK Medicines and

Healthcare products Regulatory Agency (MHRA) to determine
whether the Group has complied with its pharmacovigilence
obligations in reporting data from clinical trials for Seroxat/Paxil in
children and adolescents.
Cidra, Puerto Rico manufacturing site

Following FDA inspections in October 2003 and November 2004
which resulted in observations of possible deficiencies in
manufacturing practices at the Groups manufacturing facility in Cidra,
Puerto Rico, in March 2005 the FDA halted distribution of supplies of
Paxil CR and Avandamet due to manufacturing issues. The FDA
observations related to certain aspects of production controls, process
validation and laboratory investigations.
Subsequent to the initial subpoenas, several states through their

respective attorneys general and several counties in New York state
filed civil lawsuits in state and federal court against GSK and several
other drug companies. The actions claim, on behalf of the states as
payers and on behalf of in-state patients as consumers, damages and
restitution due to AWP-based price reporting for an undefined set of
pharmaceutical products covered by the states Medicaid programs.
In addition, private payer class action lawsuits have been filed against
GSK in several federal district and state courts. All the federal cases
have been consolidated in a multidistrict litigation proceeding in the
US District Court for the District of Massachusetts. In August 2005,
the judge in that MDL proceeding granted in part and denied in part
the private-payer plaintiffs motion for class certification, thereby
narrowing the scope of the class claim. Fact discovery in that
proceeding closed as to the Group at the end of August 2005 and
expert discovery is under way. Discovery is proceeding in some of the
suits filed by state attorneys general in state courts.
The Cidra site is engaged in tableting and packaging for a range of

GSK products primarily for the US market including Paxil, Paxil CR,
Coreg, Avandia and Avandamet. In April 2005, the Group reached
agreement with the FDA on a Consent Decree. The Consent Decree
provides for an independent expert to review manufacturing
processes at the site for compliance with FDA Good Manufacturing
Practice (GMP) requirements. As provided in the Consent Decree, the
Group provided a report to the FDA on the deficiencies identified in
this review, setting out a corrective plan and timetable for completion.
FDA inspectors recently conducted a general GMP inspection and
follow-up to the Groups report. In January 2006, the FDA issued a
Form 483, listing five observations that were made during the
inspection to which the Group responded in February. Those
observations were consistent with the findings of the independent
expert and effectively already included as part of the Groups
remediation plan for the site. The Group remains fully committed to
working co-operatively with the FDA to address any issues in a timely
fashion. The Group has resumed manufacture of products at the site.
Nominal pricing
The Group responded to two letter requests from the US Senate
Committee on Finance, dated April 2004 and February 2005, for
documents and information relating to the nominal price exception
to the best price reporting requirements under the Medicaid Drug
Rebate Program. There has been no further activity in connection with
this inquiry by the Committee as to the Group since September 2005.
In May 2004, the Group was advised by the US Department of Justice
that they are investigating certain of the Groups nominal pricing
arrangements to determine whether those arrangements qualify
under the exception to the best price reporting requirements or violate
civil statutes or laws. The Group is co-operating in that investigation
and has provided documents and information to the Department of
Justice regarding nominal pricing arrangements for a number of the
Groups products.
No financial penalties have been imposed under the Consent Decree.

The Consent Decree allows for potential future penalties up to a
maximum of $10 million a year if the Group fails to meet the terms
of the Decree.
The Group was also required to post a bond to ensure that product
previously seized by the FDA was appropriately destroyed or
reconditioned. The Group has met all the requirements of the bond,
which expires in March 2006.
In April 2005, the Group received a subpoena from the US Attorneys
Office in Boston requesting production of records regarding
manufacturing at the Cidra site covering the same type of information
as that collected by the US government in Puerto Rico in 2003.
162

continued
Relafen
In August 2001, the US District Court for the District of Massachusetts
ruled the Groups patent for nabumetone (Relafen) invalid for
anticipatory art and unenforceable on the grounds of inequitable
conduct. In August 2002, the CAGC issued a decision affirming the
District Court judgment of invalidity but declining to rule on the
judgment of inequitable conduct.
Anti-trust
Paxil/Seroxat
In the paroxetine patent infringement actions brought by the Group
as described under Intellectual property above, Apotex, Alphapharm,
BASF and Sumike have filed anti-trust and unfair competition
counterclaims against the Group in the US District Court for the
Eastern District of Pennsylvania based on allegations that the Group
monopolised a market for Paxil by bringing allegedly sham patent
litigation and allegedly abusing the regulatory procedures for the
listing of patents in the FDA Orange Book. Whilst the Apotex matter
remains in the discovery stage, the three other actions have been
stayed.
Following the District Court decision, anti-trust claims alleging

competitive injury and overcharges were filed by Teva and Eon
Pharmaceuticals, generic manufacturers of nabumetone, by
purported classes of direct and indirect purchasers and payers and by
individual retail chains. All aspects of this litigation have been
concluded with the exception of an appeal taken by certain indirect
purchasers to the trial judges order giving final approval to the
settlement with that class. The appeal is pending before the US Circuit
Court of Appeals for the First Circuit.
In November 2000, the US Federal Trade Commission (FTC) staff

advised the Group that they were conducting a non-public
investigation to determine whether the Group was violating Section
5 of the Federal Trade Commission Act by monopolizing or
attempting to monopolize the market for paroxetine hydrochloride
by preventing generic competition to Paxil and requested the Group
to submit certain information in connection with that investigation.
In October 2003 the FTC closed its investigation on the basis of its
finding that no further action was warranted.
Following public reference to the FTC investigation regarding Paxil,
purported class actions were filed in the US District Court for the
Eastern District of Pennsylvania on behalf of indirect purchasers based
on allegations similar to those in the anti-trust counterclaims brought
by Apotex. Similar actions were filed by the City of New York in the
Eastern District of Pennsylvania and by indirect purchasers in Florida,
California and Minnesota. The Pennsylvania class actions have been
settled and the class settlements have been approved, although
certain objectors have appealed the approval of the indirect purchaser
settlement. The City of New York action has been settled, the action
in Minnesota and one of the California actions have been dismissed
and the Florida action and another California action have been stayed.
The Group has also settled similar threatened claims by a group of
chain drug stores and has conditionally settled threatened claims by
state attorneys general, but it remains to be seen how many states
will join in the settlement. Similar class actions have been filed in
provincial courts in Canada on behalf of direct and indirect purchasers.
All those cases are in their early stages.
In relation to the same matter, the Minnesota state attorney general

has filed a civil investigative demand and, subsequently, a complaint
alleging that the Group has violated state anti-trust and commercial
laws. The Group has filed a motion to dismiss the complaint. Oral
argument on that motion was completed in November 2005 but as
of the date of this report no decision has been announced.
The Group has also been named as a defendant, along with thirteen
other drug companies, in a state court action in California, in which
the plaintiffs, independent pharmacies, allege that the defendants
unlawfully conspired to keep prices artificially high in the USA to the
detriment of the plaintiffs. The parties are involved in extensive
discovery. A trial date has been set for 25th September 2006.
In October 2005, the Competition Directorate of the European

Commission initiated an inspection concerning allegations that the
Group has abused a dominant position in the marketplace concerning
enforcement of its intellectual property rights, litigation surrounding
regulatory approvals and marketing of Seroxat in Europe. The Group
is co-operating fully with the Commission.
Wellbutrin SR
In December 2004, and January and February 2005, lawsuits, several
of which purported to be class actions, were filed in the US District
Court for the Eastern District of Pennsylvania against the Group on
behalf of direct and indirect purchasers of Wellbutrin SR. The
complaints allege violations of US anti-trust laws through sham
litigation and fraud on the patent office by the Group in obtaining and
enforcing patents covering Wellbutrin SR. The complaints follow the
introduction of generic competition to Wellbutrin SR in April 2004
after district and appellate court rulings that a generic manufacturer
did not infringe the Groups patents. Oral argument on the Groups
motion to dismiss was completed in February 2006 but as of the date
of this report no decision has been announced.
163
Canadian importation
The Group, along with eight other pharmaceutical companies, has
been named in seven purported class action lawsuits. Following the
Groups actions in 2003 to reduce illegal importation of prescription
drugs from Canada, the lawsuits alleged that the companies entered
into an unlawful conspiracy to prevent Canadian pharmacies from
selling their products to US customers. Those lawsuits were
consolidated into one action before the US District Court for the
District of Minnesota. The Groups motion to dismiss the consolidated
action was granted by the court and that decision was appealed to
the US Circuit Court of Appeals for the Eighth Circuit. As of the date
of this report no date for oral argument had been announced.

continued

Commercial and corporate
Relenza
In May 2004, Biota Holdings Limited filed a complaint in the Victorian
Supreme Court in Australia alleging that the Group had failed to fulfil
its development, promotion and production obligations for zanamivir
(Relenza) under the terms of the licence agreement between the
Group and Biota. Biota is seeking substantial cash damages. The
Group believes that it has adhered to its obligations under the licence
agreement. The parties are involved in extensive discovery.
Securities class action
In September 2005, attorneys representing a purported class of
purchasers of GSK shares and American Depositary Shares (ADSs)
filed a second amended securities class action complaint against the
Group in the US District Court for the Southern District of New York
alleging that the Group violated US securities laws through failure to
disclose unfavourable clinical data from studies on Paxil,
misrepresentation of the remaining patent protection for Paxil and
Augmentin and violation of the Federal False Claims Act on the basis
of the Groups recent AWP settlement with the government. The
Group has filed a motion to dismiss.
Environmental matters
GSK has been notified of its potential responsibility relating to past
operations and its past waste disposal practices at certain sites,
primarily in the USA. Some of these matters are the subject of
litigation, including proceedings initiated by the US federal or state
governments for waste disposal site remediation costs and tort actions
brought by private parties.
GSK has been advised that it may be a responsible party at
approximately 28 sites, of which 14 appear on the National Priority
List created by the Comprehensive Environmental Response
Compensation and Liability Act (Superfund).
These proceedings seek to require the operators of hazardous waste
facilities, transporters of waste to the sites and generators of
hazardous waste disposed of at the sites to clean up the sites or to
reimburse the government for cleanup costs. In most instances, GSK
is involved as an alleged generator of hazardous waste although there
are a few sites where GSK is involved as a current or former operator
of the facility. Although Superfund provides that the defendants are
jointly and severally liable for cleanup costs, these proceedings are
frequently resolved on the basis of the nature and quantity of waste
disposed of at the site by the generator. GSKs proportionate liability
for cleanup costs has been substantially determined for about 20 of
the sites referred to above.
GSKs potential liability varies greatly from site to site. While the cost
of investigation, study and remediation at such sites could, over time,
be substantial, GSK routinely accrues amounts related to its share of
the liability for such matters.
Tax matters
Pending tax matters, including disclosure of the tax liability of 2.3
billion (2004 1.8 billion), are described in Note 12, Taxation.
164
GlaxoSmithKline plc

Directors statement of responsibility in relation to
the companys financial statements
Going concern basis

After making enquiries, the Directors have a reasonable
expectation that the company has adequate resources to continue in
operational existence for the foreseeable future. For this reason, they
continue to adopt the going concern basis in preparing the financial
statements.
The Directors are:

responsible for ensuring the maintenance of proper accounting
records, which disclose with reasonable accuracy the financial
position of the company at any time and from which financial
statements can be prepared to comply with the Companies
Act 1985
The Combined Code

The Board considers that GlaxoSmithKline plc applies the principles of
the Combined Code on Corporate Governance of the Financial
Reporting Council, as described under Corporate governance on
pages 27 to 36, and has complied with its provisions except as
described on pages 35 and 36.
required by law to prepare financial statements for each financial

period which give a true and fair view of the state of affairs of the
company as at the end of the financial period and of the profit or
loss for that period
responsible also for ensuring the operation of systems of
internal control and for taking reasonable steps to safeguard the
assets of the company and for preventing and detecting fraud and
other irregularities.
As required by the Listing Rules of the Financial Services Authority, the

auditors have considered the Directors statement of compliance in
relation to those points of the Combined Code which are specified
for their review.
The balance sheet for the year ended 31st December 2005, and
supporting notes are set out on pages 167 to 170 of this report.
The Directors confirm that suitable accounting policies have been
consistently applied in the preparation of the financial statements,
supported by reasonable and prudent judgements and estimates
as necessary; applicable accounting standards have been followed,
and the financial statements have been prepared on the going
concern basis.

Chairman
1st March 2006
The responsibilities of the auditors in relation to the financial

statements are set out in the Independent Auditors report (page 166).
The Annual Report 2005 is published in hard-copy printed form and

made available on the website. The Directors are responsible for the
maintenance and integrity of the Annual Report on the website in
accordance with UK legislation governing the preparation and
dissemination of financial statements. Access to the website is
available from outside the UK, where comparable legislation may be
different.
Directors remuneration
remuneration policies operated by GlaxoSmithKline and disclosures on
Directors remuneration and other disclosable information relating to
Directors and officers and their interests. It has been prepared in
accordance with the Companies Act 1985 and complies with Section
B of the Combined Code on Corporate Governance.
165
GlaxoSmithKline plc

to the members of GlaxoSmithKline plc
Basis of audit opinion

We conducted our audit in accordance with International Standards
on Auditing (UK and Ireland) issued by the Auditing Practices Board.
An audit includes examination, on a test basis, of evidence relevant
to the amounts and disclosures in the parent company financial
statements and the part of the Directors Remuneration Report to be
audited. It also includes an assessment of the significant estimates
and judgments made by the directors in the preparation of the parent
company financial statements, and of whether the accounting policies
are appropriate to the companys circumstances, consistently applied
and adequately disclosed.
We have audited the parent company financial statements of

GlaxoSmithKline plc for the year ended 31st December 2005 which
comprise the balance sheet, and the related notes. These parent
company financial statements have been prepared under the
accounting policies set out therein. We have also audited the
information in the Directors Remuneration Report that is described
as having been audited.
We have reported separately on the group financial statements of
GlaxoSmithKline plc for the year ended 31st December 2005.
Respective responsibilities of directors and auditors

The directors responsibilities for preparing the Annual Report, the
Directors Remuneration Report and the parent company financial
statements in accordance with applicable law and United Kingdom
Accounting Standards (United Kingdom Generally Accepted
Accounting Practice) are set out in the Statement of Directors
Responsibilities.
We planned and performed our audit so as to obtain all the

information and explanations which we considered necessary in
order to provide us with sufficient evidence to give reasonable
assurance that the parent company financial statements and the part
of the Directors Remuneration Report to be audited are free from
material misstatement, whether caused by fraud or other irregularity
or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the parent company
financial statements and the part of the Directors Remuneration
Report to be audited.
Our responsibility is to audit the parent company financial statements

and the part of the Directors Remuneration Report to be audited in
accordance with relevant legal and regulatory requirements and
International Standards on Auditing (UK and Ireland). This report,
including the opinion, has been prepared for and only for the
companys members as a body in accordance with Section 235 of the
Companies Act 1985 and for no other purpose. We do not, in giving
this opinion, accept or assume responsibility for any other purpose or
to any other person to whom this report is shown or into whose
hands it may come save where expressly agreed by our prior consent
in writing.
Opinion
In our opinion:
the parent company financial statements give a true and fair view,
in accordance with United Kingdom Generally Accepted Accounting
Practice, of the state of the companys affairs as at 31st December
2005; and
We report to you our opinion as to whether the parent company

financial statements give a true and fair view and whether the
parent company financial statements and the part of the Directors
Remuneration Report to be audited have been properly prepared in
accordance with the Companies Act 1985. We also report to you
if, in our opinion, the Directors Report is not consistent with the
parent company financial statements, if the company has not kept
proper accounting records, if we have not received all the
information and explanations we require for our audit, or if
information specified by law regarding directors remuneration and
other transactions is not disclosed.
the parent company financial statements and the part of the

Directors Remuneration Report to be audited have been properly
prepared in accordance with the Companies Act 1985.
PricewaterhouseCoopers LLP
Chartered Accountants and Registered Auditors
London
1st March 2006
We read other information contained in the Annual Report and

consider whether it is consistent with the audited parent company
financial statements. The other information comprises only the joint
statement by the Chairman and Chief Executive, the financial
summary, description of business, the corporate governance
statement and the operating and financial review and prospects. We
consider the implications for our report if we become aware of any
apparent misstatements or material inconsistencies with the parent
company financial statements. Our responsibilities do not extend to
any other information.
166
GlaxoSmithKline plc
Company balance sheet UK GAAP

Notes
2005
m
2004
(restated)
m
18,727
18,616
Fixed assets
18,727
18,616
Debtors
Cash at bank
237
5
218
22
242
240
Investment in subsidiary companies
Current assets
Creditors: amounts due within one year
(8,862)
(6,825)
Net current liabilities
(8,620)
(6,585)
Net assets
10,107
12,031
1,491
549
902
7,165
1,484
304
767
9,476
10,107
12,031
Capital and reserves

Called up share capital
Other reserves
Profit and loss account
G
G
H
H
Equity shareholders funds
Approved by the Board on 1st March 2006

Chairman
167
GlaxoSmithKline plc
Notes to the company balance sheet UK GAAP

A Presentation of the financial statements

GlaxoSmithKline plc is the parent company of GSK, a major global
healthcare group which is engaged in the creation and discovery,
development, manufacture and marketing of pharmaceutical
products, including vaccines, over-the-counter (OTC) medicines and
health-related consumer products.
Preparation of financial statements
The financial statements are drawn up in accordance with UK
generally accepted accounting principles (UK GAAP) and with UK
accounting presentation as at 31st December 2005, with comparative
figures as at 31st December 2004.
The company accounts for taxation which is deferred or accelerated

by reason of timing differences which have originated but not reversed
by the balance sheet date. Deferred tax assets are only recognised to
the extent that they are considered recoverable against future taxable
profits.
Deferred tax is measured at the average tax rates that are expected
to apply in the periods in which the timing differences are expected
to reverse. Deferred tax liabilities and assets are not discounted.
As permitted by s.230 of the Companies Act 1985, the profit and loss
account of the company is not presented in this Annual Report.
C New accounting policies

The Accounting Standards Board (ASB) issued Financial Reporting
Stanard (FRS) 20 Share Based Payments in April 2004. Although the
company does not incur a charge under this standard, the issuance
by the company to its subsidiaries of a grant over the companys
options, represents additional capital contributions by the company
in its subsidiaries. An additional investment in subsidiaries results with
a corresponding increase in shareholders equity. The additional capital
contribution is based on the fair value of the grant issued allocated
over the underlying grants vesting period.
Accounting convention and standards

The balance sheet has been prepared using the historical cost
convention and complies with applicable UK accounting standards.
Accounting principles and policies
The preparation of the balance sheet in conformity with generally
accepted
accounting
principles
requires
management
to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the balance sheet. Actual amounts
could differ from those estimates.
The ASB issued FRS 21 Events after the balance sheet date in May
2004. This standard replaced Statement of Standard Accounting
Practice 17 Accounting for post balance sheet events and the main
effect of this change is to prohibit the recording of a provision for a
proposed dividend where the dividend is declared after the balance
sheet date. FRS 21 is applicable for accounting periods beginning on
or after 1st January 2005. Therefore final dividends are now only
recognised in the profit and loss account when shareholders have
approved such amount and interim dividends are only recognised
when paid.
The balance sheet has been prepared in accordance with the

companys accounting policies approved by the Board and described
in Note B.
Taxation
Current tax is provided at the amounts expected to be paid applying
tax rates that have been enacted or substantially enacted by the
balance sheet date.
B Accounting policies
Foreign currency transactions
Foreign currency transactions are recorded at the exchange rate ruling
on the date of transaction, or at the forward rate if hedged by a
forward exchange contract. Foreign currency assets and liabilities are
translated at rates of exchange ruling at the balance sheet date, or at
the forward rate.
During the year the company also adopted FRS 23 The Effects of
Changes in Foreign Exchange Rates, FRS 25 Financial Instruments:
Disclosure and Presentation, FRS 26 Financial Instruments:
Measurement, and FRS 28 Corresponding Amounts. The adoption
of these standards has not had a material impact on the companys
balance sheet.
Dividends paid and received

Dividends paid and received are included in the accounts in the period
in which the related dividends are actually paid or received.
Expenditure
Expenditure is recognised in respect of goods and services received
when supplied in accordance with contractual terms. Provision is
made when an obligation exists for a future liability in respect of a past
event and where the amount of the obligation can be reliably
estimated.
Investments in subsidiary companies
Investments in subsidiary companies are held at cost less any provision
for permanent diminution in value.
168
GlaxoSmithKline plc

D Fixed assets
2005
m
2004
(restated)
m
Shares in GlaxoSmithKline Finance plc

Shares in GlaxoSmithKline Services Unlimited
Shares in GlaxoSmithKline Holdings (one) Limited
17,888
18
17,888
24
18
Capital contribution relating to share based payments
17,906
821
17,930
686
18,727
18,616
Subsequent to the year-end the company formed a new subsidiary, GlaxoSmithKline Holdings Limited, and sold the entire share holding in
GlaxoSmithKline Finance plc to it. GlaxoSmithKline Holdings Limited issued new shares to the company as consideration.
E Debtors
2005
m
2004
m
127
110
110
108
237
218
2005
m
2004
(restated)
m
4
8,857
1
4
6,821
8,862
6,825
Ordinary shares of 25p each

Number
m
Share
premium
m
Amounts due within one year:

Corporate tax
Amounts owed by Group undertakings
Amounts due within one year:

Dividends payable
Amounts owed to Group undertakings
Other creditors
G Share capital and share premium account
Share capital authorised

10,000,000,000
10,000,000,000
2,500
2,500
Share capital issued and fully paid

At 1st January 2004
5,949,463,628
6,300,203
(18,075,000)
1,487
2
(5)
264
40

5,937,688,831
25,162,425
1,484
7
304
245
5,962,851,256
1,491
549
Number (000) of shares issuable under outstanding options

Number (000) of unissued shares not under option
31st December
2005
31st December
2004
221,293
276,954
3,815,856
3,785,358
At 31st December 2005, of the issued share capital, 167,436,200 shares were held in the ESOP Trust, 142,779,678 shares were held as Treasury
shares and 5,652,635,378 shares were in free issue. All issued shares are fully paid.
169
F Creditors
GlaxoSmithKline plc

Other
reserves
(restated)
m
Profit and
loss account
(restated)
m
Total
(restated)
m
At 1st January 2004, as previously reported

Prior year adjustment implementation of FRS 20
Prior year adjustment implementation of FRS 21
76
476
8,905
1,328
8,981
476
1,328
At 1st January 2004

552
210
10,233
2,719
(2,476)
(201)
(799)
10,785
2,719
(2,476)
(196)
(799)
210

767
135
9,476
1,079
(2,390)
(1,000)
10,243
1,079
(2,390)
(1,000)
135
902
7,165
8,067
H Reserves
The profit of GlaxoSmithKline plc for the year was 1,079 million (2004 2,719 million), which after dividends of 2,390 million (2004
2,476 million), gave a retained loss of 1,311 million (2004 profit 243 million). After the cost of shares purchased and cancelled of
nil (2004 201 million) and shares purchased and held as Treasury shares of 1,000 million (2004 799 million), the profit and loss
account reserve at 31st December 2005 stood at 7,165 million (2004 9,476 million), of which 4,096 million is unrealised (2004
4,096 million).
170
This section includes the financial record presenting historical
information analysed in accordance with current reporting practice.
The transition date to IFRS for GSK is 1st January 2003. Therefore, the
2005, 2004 and 2003 information included in the Five Year Record
is in accordance with IFRS. The 2002 and 2001 information is in
accordance with UK GAAP.
To provide a link between IFRS and UK GAAP, 2003 information is
presented also under UK GAAP. The accounting policies used in the
preparation of the UK GAAP information are disclosed in the 2004
Annual Report. Information prepared under IFRS is not directly
comparable with information prepared under UK GAAP.
The Five year record also presents information in accordance with US
GAAP.
This section also discusses shareholder return, in the form of dividends
and share price movements, and provides other information for
shareholders.
172
178
182
186
INVESTOR INFORMATION
Financial record
Quarterly trend
Five year record
171
Financial record
Quarterly trend
An unaudited analysis is provided by quarter of the Group results in sterling for the financial year 2005. The analysis comprises statutory results
and pharmaceutical sales by therapeutic area.
Income statement
12 months 2005
Q4 2005
CER %
CER %
Turnover Pharmaceuticals
Consumer Healthcare
18,661
2,999
8
2
9
4
5,108
799
10
1
14
5
Total turnover
Cost of sales
Selling, general and administrative expenditure
Research and development expenditure
21,660
(4,764)
(7,250)
(3,136)
364
7
8
8
9
1
8
5,907
(1,298)
(2,040)
(968)
32
8
8
(2)
11
13
10
13
6,874
16
19
1,633
20
32
Operating profit
Finance income
Finance costs
Share of after tax profits/(losses) of joint ventures and associated undertakings
Profit on disposal of interests in associates
Taxation
Tax rate %
257
(451)
52
85
(125)
13
6,732
(1,916)
28.5%
13
16
1,606
(455)
28.3%
11
21
Profit after taxation for the period
4,816
17
20
1,151
31
44

127
4,689
33
47
82.6p
82.0p
Earnings per share
172
29
1,122
18
21
19.8p
19.6p
Financial record
continued
Q3 2005
Q2 2005
Q1 2005
CER %
CER %
CER %
4,709
762
10
3
12
6
4,505
741
6
3
6
3
4,339
697
6
2
4
1
5,471
(1,184)
(1,884)
(803)
183
9
6
13
15
11
7
14
15
5,246
(1,155)
(1,681)
(702)
3
6
10
(6)
1
6
11
(6)
1
5,036
(1,127)
(1,645)
(663)
146
5
9
(3)
2
4
9
(5)
1
1,783
14
19
1,711
13
12
1,747
18
17
67
(113)
16
56
(115)
10
49
(98)
13
1,753
(500)
28.5%
16
21
1,662
(473)
28.5%
1,711
(488)
28.5%
18
17
1,253
15
20
1,189
1,223
17
15
21
1,202
17
16
10
21.3p
21.1p
31
1,158
16
20
20.4p
20.2p
21.1p
21.0p
46
1,207
173
Financial record
continued
Pharmaceutical turnover total Group

Q4 2005
CER %
Q1 2005
1,407
851
174
87
171
16
23
1
13
21
29
4
2
20
1,235
737
151
79
166
13
20
3
(6)
12
16
22
7
(4)
14
1,214
725
159
85
148
13
22
2
(9)
13
12
21
2
(9)
11
1,198
690
154
79
171
12
22
(11)
12
11
20
(11)
9

Seroxat/Paxil
Paxil IR
Paxil CR
Wellbutrin
Wellbutrin IR, SR
Wellbutrin XL
Imigran/Imitrex
Lamictal
Requip
886
158
122
36
217
24
193
188
228
50
1
(35)
(15)
(64)
25
(26)
36
1
19
57
6
(35)
(15)
(63)
32
(20)
44
6
26
56
806
142
118
24
192
23
169
180
210
42
(5)
(44)
(20)
(77)
9
(52)
31
2
20
41
(3)
(42)
(18)
(76)
11
(49)
32
3
22
45
769
152
126
26
167
13
154
162
216
34
(12)
(47)
(33)
(73)
(11)
(81)
34
3
28
21
(12)
(46)
(33)
(73)
(13)
(83)
32
3
26
17
758
163
122
41
163
32
131
167
195
30
(15)
(43)
(36)
(57)
(23)
(75)
56
30
15
(17)
(44)
(36)
(59)
(26)
(76)
49
(3)
27
15
Anti-virals
HIV
Combivir
Trizivir
Epivir
Ziagen
Retrovir
Agenerase, Lexiva
Epzicom/Kivexa
697
406
148
77
62
34
8
33
44
11
15
5
9
(3)
1
3
(18) (15)
(16) (11)
(35) (27)
59
57
>100 >100
664
399
147
77
65
33
12
31
34
9
5
(5)
(13)
(20)
9
66
>100
11
7
2
(3)
(11)
(21)
9
72
634
386
148
75
68
36
10
26
23
7
7
6
5
6
5
(13) (14)
(11) (12)
(6)
(3)
(4)
9
72
73
>100 >100
603
363
140
74
66
33
11
22
17
Herpes
Valtrex
Zovirax
224
190
34
17
23
(8)
22
30
(8)
210
179
31
16
20
(4)
17
22
(3)
195
162
33
Zeffix
CER %
Q2 2005
CER %
Respiratory
Seretide/Advair
Flixotide/Flovent
Serevent
Flixonase/Flonase
Q3 2005
8
13
(11)
7
12
(11)
197
164
33
CER %
9
7
6
4
2
1
(7)
(9)
(6)
(7)
(12) (13)
8
10
>100 >100
16
28
(20)
13
23
(20)
42
20
24
37
12
37
12
29
(3)
Anti-bacterials
Augmentin
Augmentin IR
Augmentin ES, XR
Zinnat/Ceftin
405
170
142
28
54
(3)
2
(20)
(6)
4
(18)
(4)
349
149
127
22
41
(2)
(6)
(1)
(29)
(4)
(4)
2
(29)
(2)
348
155
129
26
40
(10)
(14)
(3)
(44)
(19)
(9)
(13)
(3)
(59)
(17)
417
192
154
38
62
(1)
(6)
10
(40)
3
(1)
(6)
11
(41)
5
Metabolic
Avandia
Avandamet
Bonviva/Boniva
387
289
46
11
12
19
26
35
(41) (37)
>100 >100
396
299
56
3
21
29
(5)
24
33
(5)
393
323
29
4
17
27
(43)
16
25
(43)
0
319
243
44
22
27
11
19
23
7
Vaccines
Hepatitis
Infanrix/Pediarix
420
113
121
17
(1)
17
20
4
22
399
121
125
20
18
31
22
20
32
322
116
102
15
10
18
16
10
19
248
94
83
3
4
9
4
4
9
Oncology and emesis

Zofran
Hycamtin
271
229
25
12
14
2
18
21
4
262
215
26
5
6
(2)
7
7
248
204
23
6
7
(8)
5
6
(8)
235
189
25
9
8
7
6
5
4

Coreg
Levitra
Avodart
Arixtra
Fraxiparine
Vesicare
366
159
10
39
8
55
5
26
31
29
38
(26) (17)
71
70
>100 >100
24
28
343
154
9
36
7
49
4
44
48
39
40
(20) (18)
98 >100
>100 >100
>100 >100
312
125
11
28
5
55
1
43
42
13
11
35
22
>100 >100
310
135
10
26
4
52
3
Other
Zantac
269
64
Total
5,108
(11)
(11)
(8)
(7)
10
14
255
61
8
(8)
11
(8)
265
60
7
(15)
7
(14)
251
59
4,709
10
12
4,505
4,339
Pharmaceutical turnover includes co-promotion income.
174
57
55
50
44
(39) (41)
>100 >100
(2)
(13)
(3)
(13)
Financial record
continued
Pharmaceutical turnover USA

Q3 2005
m
Respiratory
Seretide/Advair
Flixotide/Flovent
Serevent
Flixonase/Flonase
733
493
72
29
134
21
26
4
20
29
34
13
7
28
651
417
65
25
139
16
20
8
(17)
16
17
22
10
(17)
17
605
397
64
26
113
21
34
1
(27)
15
18
31
(2)
(28)
13
591
380
61
24
120
12
25
1
(30)
8
20
(3)
(33)
(5)

Seroxat/Paxil
Paxil IR
Paxil CR
Wellbutrin
Wellbutrin IR, SR
Wellbutrin XL
Imigran/Imitrex
Lamictal
Requip
585
32
32
212
20
192
138
163
29
3
9
(73) (70)
(100) (100)
(67) (66)
26
33
(23) (20)
35
43
(1)
6
35
44
88
93
517
21
1
20
187
19
168
131
145
23
(6)
(83)
(98)
(80)
10
(54)
30
2
35
62
(5)
(82)
(94)
(80)
11
(54)
32
3
37
77
471
30
6
24
164
11
153
112
140
15
(17)
(80)
(88)
(75)
(12)
(83)
33
5
38
25
(19)
(79)
(88)
(74)
(14)
(85)
32
3
35
15
478
50
11
39
160
30
130
123
120
13
(18)
(64)
(76)
(59)
(23)
(76)
56
2
38
14
(22)
(66)
(77)
(61)
(26)
(77)
48
(2)
32
8
Anti-virals
HIV
Combivir
Trizivir
Epivir
Ziagen
Retrovir
Agenerase, Lexiva
Epzicom/Kivexa
346
203
74
44
22
14
1
20
28
11
2
(2)
6
(35)
(24)
(78)
28
19
9
6
16
(31)
(18)
(75)
33
333
198
71
43
22
13
5
20
24
7
(1)
(3)
(8)
(39)
(34)
7
43
(3)
(9)
(37)
(35)
54
305
187
70
40
24
15
4
16
18
5
(1)
4
(18)
(37)
(20)
(9)
37
3
(2)
1
(18)
(38)
(17)
33
301
178
68
39
25
13
4
14
15
Herpes
Valtrex
Zovirax
132
131
1
29
31
(20)
39
42
(67)
123
121
2
23
24
(47)
24
26
(33)
107
106
1
15
15
6
10
12
(50)
114
112
2
11
Anti-bacterials
Augmentin
Augmentin IR
Augmentin ES, XR
Zinnat/Ceftin
Metabolic
Avandia
Avandamet
Bonviva/Boniva
3
74
35
12
23
4
(18) (13)
(33) (30)
(46) (37)
(25) (26)
30 100
3
56
29
9
20
2
(24) (21)
(34) (31)
(38) (36)
(32) (29)
>100 100
CER %
Q1 2005
Zeffix
CER %
Q2 2005
CER %
CER %
16
11
8
3
4
(4)
(9)
(20) (24)
(24) (28)
6
>100 >100
33
36
(51)
28
30
(33)
17
50
55
29
7
22
1
(37)
(45)
(31)
(44)
(66)
(38)
(45)
(36)
(52)
(50)
76
46
12
34
3
(29)
(39)
(18)
(43)
(2)
(32)
(41)
(20)
(46)
(25)
245
209
25
10
4
27
(64)
12
36
(61)
268
226
39
3
22
35
(24)
24
38
(25)
267
248
15
4
18
35
(65)
15
31
(65)
215
181
34
21
28
(6)
16
22
(11)
95
35
37
14
(6)
(10)
20
3
(8)
123
43
48
82
26
44
84
26
45
66
33
32
2
(3)
2
(1)
(6)
54
26
28
2
(13)
20
(2)
(16)
17
Oncology and emesis

Zofran
Hycamtin
207
179
17
18
20
8
25
28
13
199
167
18
8
8
2
9
10
6
184
154
14
10
12
(10)
7
9
(13)
171
139
17
12
10
10
7
5
6

Coreg
Levitra
Avodart
Arixtra
Fraxiparine
Vesicare
217
158
9
21
6
35
30
81
81
>100
44
39
80
91
100
205
153
7
20
4
43
44
40
42
>100 >100
>100 100
>100 >100
168
124
10
12
3
21
19
13
11
>100 >100
70
71
176
133
9
12
2
(16)
(4)
(10)
6
17
15
12
19
Vaccines
Hepatitis
Infanrix, Pediarix
Other
Zantac
Total
19
17
2,521
2,369
(21)
(16)
(19)
(12)
11
12
175
16
13
2,137
(32)
(35)
(33)
(35)
17
13
2,079
43
36
52
46
(12) (18)
>100 100
(19)
(19)
(23)
(24)
(1)
Q4 2005
m
Financial record
continued
Pharmaceutical turnover Europe

Q4 2005
m
Q3 2005
m
CER %
Q2 2005
Q1 2005
CER %
CER %
Respiratory
Seretide/Advair
Flixotide/Flovent
Serevent
Flixonase/Flonase
436
277
49
39
13
11
21
(3)
(4)
(2)
10
19
(2)
(3)
(7)
388
246
42
38
14
8
17
(6)
(3)
(4)
10
18
(2)
(3)
17
420
259
48
43
19
5
9
1
1
4
6
10
416
251
49
40
14
10
19
(4)
(7)
(2)
12
21
2
(5)

Seroxat/Paxil
Paxil IR
Paxil CR
Wellbutrin
Wellbutrin IR, SR
Wellbutrin XL
Imigran/Imitrex
Lamictal
Requip
168
40
40
1
1
38
51
19
(8)
(23)
(23)
31
31
9
(10)
27
(8)
(27)
(27)
9
(11)
27
171
49
49
36
50
17
(6)
(19)
(19)
1
(10)
22
(6)
(16)
(16)
(7)
21
181
46
46
1
1
37
62
17
(6)
(30)
(30)
35
35
(1)
11
17
(5)
(31)
(30)
3
11
21
184
52
52
33
63
15
(7)
(29)
(29)
(6)
20
16
(5)
(27)
(27)
(6)
24
15
Anti-virals
HIV
Combivir
Trizivir
Epivir
Ziagen
Retrovir
Agenerase, Lexiva
Epzicom/Kivexa
194
152
53
30
29
11
4
11
14
3
3
5
5
(9) (10)
(5)
(6)
(8)
(3)
(22) (31)
(17)
>100 >100
>100 >100
194
154
58
30
30
13
4
10
9
13
14
15
17
5
7
8
11
(7)
(7)
5
>100 >100
>100 >100
199
157
60
32
33
16
4
8
4
9
9
11
11
6
7
(5)
(6)
14
14
1
7
(6)
>100 >100
186
144
56
31
30
14
4
7
2
Herpes
Valtrex
Zovirax
Zeffix
Anti-bacterials
Augmentin
Augmentin IR
Augmentin ES, XR
Zinnat/Ceftin
34
24
10
1
8
(13)
(3)
4
(17)
35
25
10
8
10
2
13
14
11
(21)
184
80
77
3
29
2
3
2
43
(14)
50
51
19
20
>100 >100
>100 >100
34
24
10
(11)
(33)
1
3
1
50
(15)
157
68
66
2
19
3
4
7
8
6
6
79 100
(14) (14)
155
70
67
3
22
49
27
13
28
36
9
13
>100 >100
45
29
10
(3)
5
(17)
(3)
4
(17)
(40)
(7)
(6)
(7)
(7)
(9)
(8)
55 >100
(22) (19)
222
98
95
3
42
13
17
16
20
13
17
>100 >100
10
14
40
26
6
31
33
24
29
>100 >100
(4)
13
(29)
(3)
14
(27)
(4)
(20)
56
30
16
1
Vaccines
Hepatitis
Infanrix/Pediarix
169
54
54
9
(3)
16
9
(4)
15
162
60
57
7
16
35
8
18
39
147
62
51
26
18
34
27
22
34
114
48
40
10
13
12
14
14
14
39
30
6
(5)
(4)
(14)
(7)
(6)
(25)
40
29
7
(5)
(7)
(3)
(5)
(9)
42
32
7
(6)
(8)
(5)
(5)
(6)
43
33
7
(1)
2
3
12
9
(82) (83)
52
50
77 100
19
21
103
1
14
2
43
55
63
(76) (80)
75 100
>100 100
>100 >100
104
1
14
2
45
98
96
(77) (80)
>100 >100
103
1
12
2
45

Coreg
Levitra
Avodart
Arixtra
Fraxiparine
Vesicare
Other
Zantac
Total
105
1
15
2
46
85
17
1,436
(22)
(9)
(21)
45
50
23
22
>100 >100
36
25
11
2
1
3
(2)
(10)
(9)
2
3
(4)
(7)
(7)
>100 >100
Metabolic
Avandia
Avandamet
Bonviva/Boniva
Oncology and emesis

Zofran
Hycamtin
CER %
>100 >100
(79) (80)
>100 >100
76
16
15
(7)
15
(6)
80
15
8
(23)
10
(17)
80
16
2
(18)
4
(20)
1,340
11
1,373
10
1,388
10
12
176
Financial record
continued
Pharmaceutical turnover International

CER %
CER %
18
29
196
74
44
16
13
18
26
7
13
(5)
Q2 2005
Q1 2005
CER %
26
37
13
23
(7)
189
69
47
16
16
6
12
3
2
13
10
17
9
14
191
59
44
15
37
CER %
Respiratory
Seretide/Advair
Flixotide/Flovent
Serevent
Flixonase/Flonase
238
81
53
19
24

Seroxat/Paxil
Paxil IR
Paxil CR
Wellbutrin
Wellbutrin IR, SR
Wellbutrin XL
Imigran/Imitrex
Lamictal
Requip
133
86
82
4
4
3
1
12
14
2
10
13
9
9
7
8
47
33
(26)
(51) (25)
>100 >100
(4)
12
27
34
118
72
68
4
5
4
1
13
15
2
(1)
35
(25)
(42)
20
24
7
1
(1)
45
(21)
8
25
117
76
74
2
2
1
1
13
14
2
8
5
5
12
>100
>100
>100
(1)
18
16
9
7
6
100
>100
>100
>100
27
96
61
59
2
3
2
1
11
12
2
Anti-virals
HIV
Combivir
Trizivir
Epivir
Ziagen
Retrovir
Agenerase, Lexiva
Epzicom/Kivexa
157
51
21
3
11
9
3
2
2
20
25
12
19
16
24
(21) (40)
(2)
19
80
(10)
66
>100 >100
137
47
18
4
13
7
3
1
1
10
7
(1)
4
19
(4)
20
1
14
12
6
11
18
(13)
50
8
130
42
18
3
11
5
2
2
1
10
16
15
(6)
17
23
8
46
12
17
13
(25)
22
25
(33)
116
41
16
4
11
6
3
1
52
33
19
6
10
(1)
6
14
(5)
54
32
22
3
14
(10)
8
19
(4)
47
27
20
1
11
(9)
Herpes
Valtrex
Zovirax
Zeffix
12
17
8
(8)
Q3 2005
58
35
23
6
13
(3)
9
13
5
18
16
11
11
4
2
30
36
>100 >100
(11) (12)
(13) (15)
(15) (17)
74 100
(28) (25)
(41) (50)
88
(1)
9
9
13 100
8
7
13
14
4
7
(6)
18
22
14
20
40
50
>100 >100
(2)
8
(13)
33
32
32
30
14
25
27
22
(1)
147
55
53
2
21
11
22
22
20
1
17
31
29
100
5
136
52
52
20
6
2
6
138
56
55
1
17
5
10
11
(22)
(9)
8
12
12
(11)
119
48
47
1
17
1
13
13
(6)
(10)
(2)
9
9
(6)
Metabolic
Avandia
Avandamet
Bonviva/Boniva
86
50
5
17
29
(14)
25
43
79
46
4
11
15
(8)
16
24
81
46
4
3
16
(8)
8
24
64
36
4
20
26
83
19
29
100
Vaccines
Hepatitis
Infanrix/Pediarix
156
24
30
30
36
18
26
98 >100
114
18
20
9
(1)
3
13
(5)
109
21
19
11
11
11
15
11
19
80
20
15
(4)
13
(13)
(5)
18
(12)
Oncology and emesis

Zofran
Hycamtin
25
20
2
(1)
14
11
20 100
23
19
1
1
5
(29)
5
12
(50)
22
18
2
(1)
2
(4)
5
6
21
17
1
6
6
4
5
6

Coreg
Levitra
Avodart
Arixtra
Fraxiparine
Vesicare
44
1
22
33
(35)
(99) (100)
>100
50
55
80
35
1
1
2
1
6
22
30
(29) (50)
(90) (67)
>100 >100
>100 >100
>100 >100
40
1
10
48
54
(29)
>100 100
31
2
39
(29)
41
(33)
Anti-bacterials
Augmentin
Augmentin IR
Augmentin ES, XR
Zinnat/Ceftin
Other
Zantac
Total
165
30
1,151
(4)
(15)
1
(17)
162
30
9
(5)
14
(6)
169
32
12
3
12
154
30
(2)
(6)
(3)
(3)
13
18
1,000
13
995
12
872
177
Q4 2005
m
Financial record
continued
Five year record

A record of financial performance is provided analysed in accordance with current reporting practice. The transition date to IFRS for
GlaxoSmithKline is 1st January 2003. Therefore, the 2005, 2004 and 2003 information included in the Five year record is in accordance with
IFRS as adopted for use in the European Union. For GSK there are no differences between IFRS as adopted for use in the European Union and
full IFRS as published by the International Accounting Standards Board. The 2002 and 2001 information is in accordance with UK GAAP.
To provide a link between IFRS and UK GAAP, 2003 information is also presented under UK GAAP. The accounting policies used in the
preparation of the UK GAAP information are disclosed in the 2004 Annual Report. Information prepared under IFRS is not directly comparable
with information prepared under UK GAAP.
The Five year record also presents information in accordance with US GAAP.
Turnover by business segment IFRS
Pharmaceuticals
Consumer Healthcare
2005
m
2004
m
2003
m
18,661
2,999
17,100
2,886
18,114
2,956
21,660
19,986
21,070
Turnover by business segment UK GAAP

Pharmaceuticals
Consumer Healthcare
Pharmaceutical turnover by therapeutic area IFRS

Respiratory
Anti-bacterials
Anti-virals
Metabolic
Vaccines
Oncology and emesis
Others
18,181
3,260
17,995
3,217
17,205
3,284
21,441
21,212
20,489
2003
m
2002
m
2001
m
4,417
4,455
1,815
2,349
1,079
1,123
1,001
771
1,171
3,987
4,511
2,210
2,299
960
1,080
977
661
1,310
3,537
4,007
2,604
2,128
875
948
838
591
1,677
18,181
17,995
17,205
2003
m
5,054
3,219
1,519
2,598
1,495
1,389
1,016
1,331
1,040
4,394
3,462
1,547
2,359
1,251
1,194
934
932
1,027
4,390
4,446
1,800
2,345
1,077
1,121
1,000
770
1,165
18,661
17,100
18,114
Pharmaceutical turnover by geographic area IFRS
2001
m
2004
m
Respiratory
Anti-bacterials
Anti-virals
Metabolic
Vaccines
Oncology and emesis
Others
2005
m
2004
m
2003
m
9,106
5,537
8,425
5,084
9,410
5,050
1,324
854
746
651
443
4,018
18,661
1,161
769
669
581
411
3,591
17,100
1,138
751
693
598
474
3,654
18,114
178
2002
m
2005
m
Pharmaceutical turnover by therapeutic area UK GAAP
USA
Europe
International:
Asia Pacific
Japan
Middle East, Africa
Latin America
Canada
International
2003
m
Financial record
continued
Pharmaceutical turnover by geographic area UK GAAP

USA
Europe
International:
Asia Pacific
Japan
Middle East, Africa
Latin America
Canada
International
2003
m
2002
m
2001
m
9,410
5,114
9,797
4,701
9,037
4,561
1,140
753
693
597
474
3,657
18,181
1,100
712
652
606
427
3,497
17,995
1,047
741
611
790
418
3,607
17,205
2003
m
2002
m
2001
m
1,556
1,082
622
1,586
1,052
579
1,603
1,106
575
3,260
3,217
3,284
2002
m
2001
m
Pharmaceutical turnover in 2005, 2004 and 2003 includes co-promotion income.
OTC medicines
Oral care
2005
m
2004
m
2003
m
1,437
943
619
1,400
913
573
1,472
915
569
2,999
2,886
2,956
Consumer healthcare turnover UK GAAP

OTC medicines
Oral care
Financial results IFRS
2005
m
Turnover
Operating profit
Profit after taxation
Weighted average number of shares in issue:
Basic
Diluted
2004
m
2003
m
21,660
6,874
6,732
4,816
82.6
82.0
19,986
5,756
5,779
4,022
68.1p
68.0p
21,070
6,050
5,954
4,308
72.3p
72.1p
5,674
5,720
5,736
5,748
5,806
5,824
99.7
100.2
116.6
Return on capital employed (%)

Financial results UK GAAP
2003
m
Turnover
Operating profit
Profit after taxation
Weighted average number of shares in issue:
Basic
Diluted
Return on capital employed (%)
21,441
6,376
6,313
4,584
77.1p
76.9p
21,212
5,569
5,524
4,060
66.5p
66.3p
20,489
4,701
4,484
3,158
49.9p
49.5p
5,806
5,824
5,912
5,934
6,064
6,116
120.8
110.6
75.6
Return on capital employed is calculated as statutory profit before taxation as a percentage of average capital employed over the year.
179
Consumer healthcare turnover IFRS
Financial record
continued
2005
m
Amounts in accordance with US GAAP

Turnover
Net income/(loss)
Basic net income/(loss) per share (pence)
Diluted net income/(loss) per share (pence)
21,660
3,336
58.8p
58.3p
2004
m
19,986
2,732
47.6p
47.5p
2003
m
21,117
2,420
41.7p
41.6p
2002
m
21,212
413
7.0p
7.0p
2001
m
20,489
(143)
(2.4)p
(2.4)p
The information presented in accordance with US GAAP is derived from financial information prepared under IFRS, as adopted for use in the
European Union, for 2003-2005 and from UK GAAP for 2001-2002.
The information below presents US GAAP net income/(loss) and net income/(loss) per share as if the results for the year ended 31st December
2001 were adjusted to reverse the amortisation expense for goodwill and indefinite-lived intangible assets, that is, as if SFAS 142 had also applied
in those years.
2001
m
Adjusted net income/(loss)

Adjusted basic net income/(loss) per share (pence)
Adjusted diluted net income/(loss) per share (pence)
1,456
24.0p
23.8p
Exchange rates
As a guide to holders of ADRs, the following tables set out, for the periods indicated, information on the exchange rate of US dollars
for sterling as reported by the Federal Reserve Bank of New York (noon buying rate).
Average
2005
2004
2003
2002
2001
1.81
1.84
1.63
1.51
1.44
The average rate for the year is calculated as the average of the noon buying rates on the last day of each month during the year.
High
Low
Feb
2006
Jan
2006
Dec
2005
Nov
2005
Oct
2005
Sept
2005
1.78
1.73
1.79
1.74
1.77
1.72
1.78
1.71
1.79
1.75
1.84
1.76
2005
2004
2003
2002
2001
23,822
43,999
23,782
44,679
24,036
44,559
23,527
46,028
23,613
46,508
15,991
3,098
5,682
5,664
2,472
16,109
2,965
5,134
5,603
1,747
18,373
2,842
3,400
5,916
1,793
17,289
2,952
5,973
6,876
1,854
18,364
2,985
6,344
7,800
1,856
The noon buying rate on 24th February 2006 was 1 = US$1.74.
Number of employees
USA
Europe
International:
Asia Pacific
Japan
Middle East, Africa
Latin America
Canada
International
Manufacturing
Selling
Administration
32,907
31,558
32,324
34,944
37,349
100,728
100,019
100,919
104,499
107,470
31,615
44,393
9,225
15,495
31,143
44,646
9,193
15,037
32,459
43,978
9,550
14,932
35,503
43,994
10,378
14,624
36,849
44,499
11,081
15,041
100,728
100,019
100,919
104,499
107,470
The number of employees is the number of permanent employed staff at the end of the financial period. It excludes those employees who are
employed and managed by GlaxoSmithKline on a contract basis.
180
Financial record
continued
Balance sheet IFRS

2005
m
2004
m
2003
m
14,021
13,177
12,164
10,780
11,622
10,298
Total assets
Current liabilities
27,198
(9,511)
(10,117)
22,944
(8,564)
(8,443)
21,920
(8,314)
(8,008)
Total liabilities
(19,628)
(17,007)
(16,322)
7,570
5,937
5,598
7,311
259
5,724
213
4,917
681
7,570
5,937
5,598
Non-current assets
Current assets
Net assets
Equity
Shareholders equity
Minority interests
Balance sheet UK GAAP

2003
m
2002
m
2001
m
Fixed assets
Current assets
8,575
12,625
8,752
10,749
8,984
10,423
Total assets
Current liabilities
21,200
(8,471)
(6,925)
19,501
(8,724)
(6,130)
19,407
(9,398)
(4,664)
Total liabilities
(15,396)
(14,854)
(14,062)
5,804
4,647
5,345
5,059
745
3,840
807
4,483
862
5,804
4,647
5,345
m
2003
m
2002
m
2001
Net assets
Equity
Shareholders equity
Minority interests
Amounts in accordance with US GAAP

m
2005
57,218
34,599
(5,293)
34,282
55,841
34,429
(4,374)
34,042
56,400
34,861
(3,640)
34,116
57,671
35,729
(3,085)
34,922
61,341
40,969
(2,116)
40,107
Total assets
Net assets
Shareholders equity
m
2004
181
Share price
At 1st January
High during the year
Low during the year
At 31st December
Increase/(Decrease)
2005
2004
2003
12.22
15.44
11.75
14.69
20%
12.80
12.99
10.42
12.22
(5)%
11.92
13.90
10.00
12.80
7%
The table above sets out the middle market closing prices derived
from the London Stock Exchange Daily Official List. The companys
share price increased by 20% in 2005 from a price of 12.22 at 1st
January 2005 to 14.69 at 31st December 2005. This compares with
an increase in the FTSE 100 index of 17% during the year.
Dividends per ADS

The table below sets out the dividends per ADS paid in US dollars in
the last five years, translated into US dollars at applicable exchange
rates.
Year
US$
2005
2004
2003
2002
2001
1.57
1.53
1.39
1.24
1.11
Dividend calendar
Fourth quarter 2005
Ex-dividend date
Record date
Payable
Market capitalisation
The market capitalisation, based on shares in public issue, of
GlaxoSmithKline at 31st December 2005 was 85 billion. At that date
GSK was the fourth largest company by market capitalisation on the
FTSE index.
15th February 2006

17th February 2006
6th April 2006
First quarter 2006

Ex-dividend date
Record date
Payable
SmithKline Beecham plc Floating Rate Unsecured

Loan Stock 1990/2010
10th May 2006

12th May 2006
6th July 2006
Second quarter 2006
The loan stock is not listed on any exchange but holders may require
SmithKline Beecham plc to redeem their loan stock at par, i.e. 1 for
every 1 of loan stock held, on the first business day of March, June,
September and December. Holders wishing to redeem all or part of
their loan stock should complete the notice on the back of their loan
stock certificate and return it to the registrar, to arrive at least 30 days
before the relevant redemption date.
Ex-dividend date
Record date
Payable
2nd August 2006

4th August 2006
5th October 2006
Third quarter 2006

Ex-dividend date
Record date
Payable
Taxation
General information concerning the UK and US tax effects of share
ownership is set out in 'Taxation information for shareholders' on
page 186.
1st November 2006

3rd November 2006
4th January 2007
Internet
Information about the company including details of the share price is
available on GSKs website at www.gsk.com.
Dividends
Information made available on the website does not constitute part

of this Annual Report.
GlaxoSmithKline pays dividends quarterly. Details of the dividends

declared, the amount and the payment dates are given in Note 14.
Investor relations
Dividends per share

The table below sets out the dividends per share paid in the last five
years.
Investor Relations may be contacted as follows:
pence
2005
2004
2003
2002
2001
44.0
42.0
41.0
40.0
39.0
Year
UK
980 Great West Road, Brentford, Middlesex TW8 9GS
Tel: +44 (0)20 8047 5557 / 5558
Fax: +44 (0)20 8047 7807
USA
One Franklin Plaza, PO Box 7929, Philadelphia PA 19101
Tel: 1 888 825 5249 toll free
Tel: +1 215 751 4638 outside the USA
Fax: +1 919 315 3344
182
continued
Analysis of shareholdings
Analysis of shareholdings at 31st December 2005:
Number of
accounts
% of total
accounts
% of total
shares
Number of
shares
Holding of shares
Up to 1,000
1,001 to 5,000
5,001 to 100,000
100,001 to 1,000,000
Over 1,000,000
139,372
45,478
12,085
1,082
491
70
23
6
1
1
2
3
6
88
50,069,101
97,708,958
183,117,826
372,632,157
5,259,323,214
Totals
198,508
100
100
5,962,851,256
Held by
Nominee companies
Investment and trust companies
Insurance companies
Individuals and other corporate bodies
BNY (Nominees) Limited
Held as Treasury shares by GlaxoSmithKline
30,696
64
16
167,730
1
1
15
85
77
1
6
14
2
4,583,100,614
46,855,187
107,531
363,755,128
826,253,118
142,779,678
Totals
198,508
100
100
5,962,851,256
The Bank of New Yorks holding held through BNY (Nominees) Limited represents the companys ADR programme, whereby each ADS represents
two Ordinary Shares of 25p nominal value.
At 24th February 2006, the number of holders of record of shares in the USA was 1,190 with holdings of 1,543,844 shares, and the number of
registered holders of the ADRs was 41,589 with holdings of 415,217,646 ADRs. Certain of these shares and ADRs were held by brokers or
other nominees. As a result the number of holders of record or registered holders in the USA is not representative of the number of beneficial
holders or of the residence of beneficial holders.
Control of company
As far as is known to the company, it is not directly or indirectly owned or controlled by one or more corporations or by any government.
The company does not know of any arrangements, the operation of which might result in a change in control of the company.
Major shareholders have the same voting rights per share as all other shareholders.
Substantial shareholdings
At 24th February 2006, the company had received notification of the following interests of 3% or more in the shares in issue, excluding
Treasury shares:
BNY (Nominees) Limited holds 830,443,108 shares representing 14.26%. These shares are held on behalf of holders of ADRs, which evidence
ADSs.
Legal & General Investment Management Limited holds 212,219,375 shares representing 3.64%.
Barclays PLC holds 221,114,143 shares representing 3.80%.
As far as is known to the company, no other person was the owner of 3% or more of the shares in issue, excluding Treasury Shares of the company.
Directors and Officers

The interests of the Directors and Officers of the company, as defined in the Companies Act 1985, in share options of the company are given
in the Remuneration Report (pages 37 to 54).
Exchange controls and other limitations affecting security holders

There are currently no UK laws, decrees or regulations restricting the import or export of capital or affecting the remittance of dividends or other
payments to holders of the companys shares who are non-residents of the UK. There are no limitations relating only to non-residents of the
UK under English law or the companys Memorandum and Articles of Association on the right to be a holder of, and to vote in respect of, the
companys shares.
The Memorandum and Articles of Association of the company and other documents referred to in this Annual Report are available for inspection
at the Registered Office of the company.
Publications
In late March 2006 GSK will publish on the website its Corporate Responsibility Report covering performance in areas including community
investment, ethics and integrity, access to medicines, R&D and environment health and safety.
183
Documents on display
continued
Nature of trading market
Annual General Meeting 2006
The Ordinary Shares of the company were listed on the London Stock
Exchange on 27th December 2000. The shares were also listed on the
New York Stock Exchange (NYSE) (in the form of American Depositary
Shares ADSs) from the same date.
The Queen Elizabeth II Conference Centre, 17th May 2006

Broad Sanctuary, Westminster,
London SW1P 3EE
The Annual General Meeting is the company's principal forum for
communication with private shareholders. In addition to the formal
business there will be a presentation by the Chief Executive Officer on
the performance of the Group and its future development. There will
be opportunity for questions to the Board, and the Chairmen of the
Board's committees will take questions on matters relating to those
committees.
The following tables set out, for the periods indicated, the high and
low middle market closing quotations in pence for the shares on the
London Stock Exchange, and the high and low last reported sales
prices in US dollars for the ADSs on the NYSE.
GlaxoSmithKline
Quarter ended 31st March 2006*
February 2006*
January 2006
December 2005
November 2005
October 2005
September 2005
Quarter ended 31st December 2005
Quarter ended 30th September 2005
Quarter ended 30th June 2005
Quarter ended 31st March 2005
Pence per share

High
Low
1500
1500
1496
1483
1544
1473
1442
1544
1442
1377
1318
1222
1209
1201
1299
1390
1780
2032
1424
1434
1424
1434
1429
1395
1343
1395
1308
1201
1175
1101
1042
1067
1060
1000
1057
1626
Investors holding shares in the company through a nominee service

should arrange with that nominee service to be appointed as a
corporate representative or proxy in respect of their shareholding in
order to attend and vote at the meeting.
ADR holders wishing to attend the meeting must obtain a proxy from
The Bank of New York which will enable them to attend the meeting
and vote on the business to be transacted. ADR holders may instruct
The Bank of New York as to the way in which the shares represented
by their ADRs should be voted by completing and returning the voting
card provided by the bank in accordance with the instructions given.
Financial reporting
Financial reporting calendar 2006
Announcement of 1st Quarter Results
US dollars per ADS
Quarter ended 31st March 2006*

February 2006*
January 2006
December 2005
November 2005
October 2005
September 2005
High
Low
52.77
52.15
52.77
51.97
53.53
52.39
51.28
53.53
51.28
51.40
50.50
47.50
43.84
43.50
46.93
47.40
50.87
57.76
50.15
50.31
50.15
50.17
49.16
49.36
49.45
49.16
46.47
45.19
44.48
41.15
39.04
39.44
39.38
32.75
32.86
48.80
April 2006
Announcement of 2nd Quarter Results
July 2006
Announcement of 3rd Quarter Results
October 2006
Preliminary Announcement of Annual Results
February 2007
Publication of Annual Report/Review
March 2007
Results Announcements
Results Announcements are issued to the London Stock Exchange
and are available on its news service. Shortly afterwards, they are
issued to the media, are made available on the website and sent to
the US Securities and Exchange Commission and the NYSE.
Financial reports
The company publishes an Annual Report and, for the investor not
needing the full detail of the Report, an Annual Review. These are
available from the date of publication on the website.
The Annual Review is sent to all shareholders on the date of
publication. Shareholders may also elect to receive the Annual Report
by writing to the companys registrars. Alternatively shareholders may
elect to receive notification by email of the publication of financial
reports by registering on www.shareview.co.uk.
Copies of previous financial reports are available on the website.
Printed copies can be obtained from the registrar in the UK and from
the Customer Response Center in the USA.
* to 24th February 2006
184
continued
Ordinary shares
The companys shares are listed on the London Stock Exchange.
Registrar
The companys registrars are:
Lloyds TSB Registrars
The Causeway, Worthing, West Sussex BN99 6DA
www.shareview.co.uk
Tel: 0870 600 3991 inside the UK
Tel: +44 (0)121 415 7067 outside the UK
The registrars also provide the following services:
GlaxoSmithKline Investment Plan
GlaxoSmithKline Individual Savings Account
GlaxoSmithKline Corporate Sponsored Nominee
Shareview service
Shareview dealing service
Share dealing service

Hoare Govett operate a postal dealing service in the companys ordinary
shares. It enables investors to buy or sell shares at competitive
commission charges. Further details may be obtained by telephoning
+44 (0) 207 661 6555.
Glaxo Wellcome and SmithKline Beecham corporate PEPs
The Share Centre Limited
Oxford House, Oxford Road, Aylesbury, Bucks HP21 8SZ
Tel: +44 (0)1296 414141
The provision of the details above is not intended to be an invitation
or inducement to engage in an investment activity. Advice on share
dealing should be obtained from a stockbroker or independent
financial adviser.
American Depositary Shares

The companys shares are listed on the NYSE in the form of American
Depositary Shares and these are evidenced by American Depositary
Receipts (ADRs), each one of which represents two ordinary shares.
In general, the NYSEs rules permit the company to follow UK
corporate governance practices instead of those that apply in the
USA, provided that the company explains any significant variations.
This explanation is provided on the companys website.
ADR programme administrator

The ADR programme is administered by:
The Bank of New York
Shareholder Relations
PO Box 11258, Church Street Station
New York NY 10286-1258
www.adrbny.com
Tel: 1 877 353 1154 toll free
Tel: +1 212 815 3700 outside the USA
Customer Response Center

Tel: 1 888 825 5249 toll free
The administrators also provide Global BuyDIRECT, a direct ADS

purchase/sale and dividend reinvestment plan for ADR holders.
185

Information for shareholders
Such a gift or other disposal is subject to both UK inheritance tax and

US estate or gift tax. The Estate and Gift Tax Convention would
generally provide for tax paid in the USA to be credited against tax
payable in the UK.
A summary of the main tax consequences for holders of shares and

ADRs who are citizens or residents of the UK or the USA is set out
below. It is not a complete analysis of all the possible tax consequences
of purchase or ownership of these securities. It is intended only as a
general guide. Holders are advised to consult their advisers with
respect to the tax consequences of the purchase and ownership of
their shares or ADRs, and the consequences under state and local tax
laws in the USA and the implications of the new UK/US Income Tax
convention.
Stamp duty
UK stamp duty or stamp duty reserve tax (SDRT) will, subject to certain
exemptions, be payable on the purchase of shares at a rate of 0.5%
of the purchase price. There is a minimum charge of 5 where a
stamp duty liability arises.
US shareholders
This statement is based upon UK and US tax laws and practices at the
date of this report.
The following is a summary of certain UK taxation and USA federal

income tax considerations that may be relevant to a US holder of
shares or ADRs. This summary only applies to a shareholder that holds
shares or ADRs as capital assets, is a citizen or resident of the USA or
a domestic corporation or that is otherwise subject to United States
federal income taxation on a net income basis in respect of the shares
or ADRs, and is not resident in the UK for UK tax purposes and does
not hold shares for the purposes of a trade, profession or vocation that
is carried on in the UK through a branch or agency.
The new UK/US Income Tax Convention came into force on 31st
March 2003. The provisions of the new treaty apply for UK tax
purposes from 1st April 2003 (UK Corporation Tax), 6th April 2003
(UK Income Tax and Capital Gains Tax) and 1st May 2003
(Withholding Taxes). For US tax purposes, the provisions of the new
treaty apply from 1st May 2003 (Withholding Taxes) and 1st January
2004 (all other US taxes). However, holders of shares or ADRs have
the ability to elect to continue to use the provisions of the previous
treaty for 12 months following the new treatys entry into force. An
election must be made in advance of the first event to which the new
treaty would apply.
Taxation of dividends
The gross amount of dividends received (without reduction for any UK
withholding tax) is treated as foreign source dividend income for US
tax purposes. It is not eligible for the dividend received deduction
allowed to US corporations. Dividends on ADRs are payable in US
dollars; dividends on shares are payable in Sterling. Dividends paid in
pounds Sterling will be included in income in the US dollar amount
calculated by reference to the exchange rate on the day the dividends
are received by the holder. Subject to certain exceptions for shortterm or hedged positions, an individual eligible US holder will be
subject to US taxation at a maximum rate of 15% in respect of
qualified dividends received before 2009. Shareholders are advised to
consult their own Tax Advisers to confirm their eligibility.
US holders of ADRs generally will be treated as the owners of the

underlying shares for the purposes of the current USA/UK double
taxation conventions relating to income and gains (Income Tax
Convention), estate and gift taxes (Estate and Gift Tax Convention)
and for the purposes of the US Internal Revenue Code of 1986, as
amended (the Code).
The following analysis deals with dividends paid after 6th April 1999
when Advance Corporation Tax (ACT) was abolished.
UK shareholders
Taxation of capital gains

Generally, US holders will not be subject to UK capital gains tax, but
will be subject to US tax on capital gains realised on the sale or other
disposal of shares or ADRs.
Taxation of dividends
From 6th April 1999, the rate of tax credits was reduced to one ninth.
As a result of compensating reductions in the rate of tax on dividend
income, there is no increase in the tax borne by UK resident individual
shareholders. Tax credits are, however, no longer repayable to
shareholders with a tax liability of less than the associated tax credit.
Estate and gift taxes

Under the Estate and Gift Tax Convention, a US shareholder is not
generally subject to UK inheritance tax.
Taxation of capital gains

UK shareholders may be liable for UK tax on gains on the disposal of
shares or ADRs. They may also be entitled to indexation relief and
taper relief on such sales. Indexation relief is calculated on the market
value of shares at 31st March 1982 and on the cost of any subsequent
purchases from the date of such purchase. Indexation relief for
individual shareholders ceased on 5th April 1998. Taper relief is
available to individual shareholders who hold or are deemed to hold
shares for at least three years before they are sold.
Stamp duty
UK stamp duty or SDRT will, subject to certain exemptions, be payable
on any issue or transfer of shares to the ADR custodian or depository
at a rate of 1.5% of their price (if issued), the amount of any
consideration provided (if transferred on sale), or their value (if
transferred for no consideration).
No SDRT would be payable on the transfer of an ADR. No UK stamp
duty should be payable on the transfer of an ADR provided that the
instrument of transfer is executed and remains at all times outside
the UK. Any stamp duty on the transfer of an ADR would be payable
at a rate of 0.5% of the consideration for the transfer. Any sale of the
underlying shares would result in liability to UK stamp duty or, as the
case may be, SDRT at a rate of 0.5%. There is a minimum charge of
5 where a stamp duty liability arises.
Inheritance tax
Individual shareholders may be liable to inheritance tax on the transfer
of shares or ADRs. Tax may be charged on the amount by which the
value of the shareholder's estate is reduced as a result of any transfer
by way of gift or other disposal at less than full market value.
186
Glossary of terms
Terms used in the Annual Report
US equivalent or brief description
Tax allowance in excess of depreciation arising from the purchase of fixed assets that delay the
charging and payment of tax. The US equivalent of tax depreciation.
Advance Corporation Tax (ACT)
An advance payment of UK tax that was made when dividends are paid. No direct US equivalent.
American Depositary Receipt (ADR)
Receipt evidencing title to an ADS. Each GlaxoSmithKline ADR represents two ordinary shares.
American Depositary Shares (ADSs)
Ordinary Shares registered on the New York Stock Exchange.
Basic earnings per share
Basic income per share.
Called-up share capital
Ordinary Shares, issued and fully paid.
CER growth
Growth at constant exchange rates.
Combined Code
Guidelines required by the Listing Rules of the Financial Services Authority to address the
principal aspects of Corporate Governance.
The company
GlaxoSmithKline plc.
Creditors
Accounts payable.
Currency swap
An exchange of two currencies, coupled with a subsequent re-exchange of those currencies,

at agreed exchange rates and dates.
Debtors
Accounts receivable.
Defined benefit plan
Pension plan with specific employee benefits, often called final salary scheme.
Defined contribution plan
Pension plan with specific contributions and a level of pension dependent upon the growth of
the pension fund.
Derivative financial instrument
A financial instrument that derives its value from the price or rate of some underlying item.
Diluted income per share.
Employee Share Ownership Plan Trusts
Trusts established by the Group to satisfy share based employee incentive plans.
Finance lease
Capital lease.
Freehold
Ownership with absolute rights in perpetuity.
Gearing ratio
Net debt as a percentage of total equity.
The Group
GlaxoSmithKline plc and its subsidiary undertakings.
Hedging
The reduction of risk, normally in relation to foreign currency or interest rate movements,
by making off-setting commitments.
Intangible fixed assets
Assets without physical substance, such as brands, licences, patents, know-how and marketing
rights purchased from outside parties.
Non-equity minority interest
Preference shares issued by a subsidiary to outside parties.
Preference shares
Shares issued at varying dividend rates that are treated as outside interests.
Profit
Income.
Net income.
Share capital
Ordinary Shares, capital stock or common stock issued and fully paid.
Shareholders funds
Shareholders equity.
Share option
Stock option.
Additional paid-up capital or paid-in surplus (not distributable).
Shares in issue
Shares outstanding.
Statement of recognised income and expense Statement of comprehensive income.

Inventories.
An affiliate in which GlaxoSmithKline holds a majority shareholding and/or exercises control.
Treasury share
Treasury stock.
Turnover
Revenue.
Stocks
187
Index
Page
Accounting policies
89
Accounting presentation
55,89
06,14
Acquisitions and disposals
119
32
106
Associates and joint ventures
97,104
Be the best place for the best people to do their best work 06,16
Board
28,30
06,07-13
106
Combined Code
35,82
Commitments
67,122
Committee reports
34,35,37-54
18-19
85
86
84
88
Consumer Healthcare
10,14,17,23,24,78
Contact details
185
Contingent liabilities
67,68,114
Corporate Executive Team
29
27-36
Corporate responsibility
06,18,183
Critical accounting policies
64
05-26
31
44-54
Directors interests
48
54
82,165
Dividends
63,100,182
Earnings per share
100
Employee costs
96
Employee share schemes
132-134
Exchange rates
92,180
Executive Director terms, conditions and remuneration
42,43
Finance costs
56,63,97
Finance income
63,97
Financial instruments and related disclosures
123-131
66-70
Financial record
172-181
81-170
Financial summary
04
56
Five year record
178-181
70,123
17
Glossary of terms
187
Goodwill
102
30
IFRS adjustments
150
15
Incentive plans
51,52
Page

Inventories
Legal proceedings
Movements in equity
Net debt
New accounting policies and future requirements
Operating profit
Other investments
Other provisions
Outlook and risk factors
Presentation of the financial statements
Principal Group companies
Quarterly trend
Reconciliation to US accounting principles
Related party transactions
Remuneration Report
Report of the Directors
Risk factors
Segment information
Share capital and share premium
Share options
Strategy
Taxation
Total Equity
Trademarks
Transition to IFRS
Treasury policies
World economy
188
83
25,157
70
33
105
104
171
157-164
67,117
67,114
92
44
46,47
89,170
55,80
95,96
103,104
105
20
113
78,95
113
71-74
67,107-112
57-61
89
147-149
20-23
66,101-102
172-177
135-146
24-26
118
37-54
04-80
26
71-74
93-95
116
49-51,132-134
182-186
06
63,97-99
186
67
66,106
66,106
05,26
150-156
69,70
36
57
57
Discovering important medicines
eradicating diseases, improving

the quality of peoples lives
and making medicines available
to a greater number of people
This is what we do and what we do matters to people.
JP Garnier (left) and Sir Christopher Gent (right)
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Meeting global challenges

GlaxoSmithKline Annual Report 2005

Annual Report 2005

Do more, feel better, live longer

Designed by CGI London.

Do more, feel better, live longer

Discovering important medicines

eradicating diseases, improving

JP Garnier (left) and Sir Christopher Gent (right)

Thanks to the efforts of our employees around the world,

2005: a year of success and progress

GSK delivered an excellent financial performance in 2005.

2005 was a landmark year for GSKs vaccines business. Sales

These figures confirm the excellent growth of our key products

The pharmaceutical industry is making a

We also acquired a plant in Marietta, Pennsylvania which will

GSK continues to meet the challenge of increasing Research &

GSK also made good progress on its pipeline of new vaccines.

Improving access to medicines

In 2006, we anticipate further good news on GSKs late-stage

GSK Annual Report 2005

However, addressing this challenge is something GSK cannot

The tragedies during the year brought home to me the extent

In 2005, GSK entered three groundbreaking public-private

We thank all our employees for their efforts in 2005. Their

Public-private partnerships use the

We are grateful for the significant contribution of Tachi Yamada,

Reaching out to patients

Sir Christopher Gent

GSK's global community investment activities in 2005 were

GSK Annual Report 2005

The Annual Report was approved by the Board of Directors on 1st

GSK Annual Report 2005

REPORT OF THE DIRECTORS

Profit attributable to minority interests

Earnings per share

Diluted earnings per share

Dividends per share

Net cash inflow from operating activities

History and development of the company

Cautionary statement regarding forward-looking statements

GSK Annual Report 2005

Our global quest is to improve the quality of human life by

Annual Report and Review

Products and competition

Discussion of the Groups management structures and corporate

The Annual Review is issued to all shareholders. The Annual Report is

The Remuneration Report gives details of the Groups policies on

GSK Annual Report 2005

REPORT OF THE DIRECTORS

Strategy and business drivers

GlaxoSmithKline is addressing the key challenges that face both the

REPORT OF THE DIRECTORS

The strategies to meet these challenges focus on several business

Build the best product pipeline in the industry

Achieve commercial and operational excellence

Improve access to medicines

GSK Annual Report 2005

Build the best product pipeline in the industry

A decision is then made on whether the information available justifies

Focus on the Patient

Finding candidate compounds

The application of experimental medicine is a major opportunity for